Police said Josef Fritzl also admitted burning the body of a baby who died at the house in Amstetten, Lower Austria.
Mr Fritzl, 73, remains in custody. His daughter, now 42, and her six surviving children have been taken into care.
A lawyer for the victims said the case showed no sign of institutional failure on behalf of the Austrian authorities.
"Up until now there is no sign that there was any mistake by officials," the lawyer, Christoph Herbst, was quoted as saying by the Austrian Press Agency (APA).
"If there had been such a mistake we would obviously have to talk about it."
However, Austrian media are questioning how such grave crimes went undetected for so long.
Lured into cellar
Photos of Mr Fritzl's basement show a concealed network of tiny windowless chambers which were soundproofed.
Prosecutors say Mr Fritzl is expected to be taken into protective custody after appearing before a magistrate.
His daughter, Elisabeth, disappeared aged 18 on 28 August 1984 when, according to her testimony to police, her father lured her into the cellar, drugging and handcuffing her before locking her up.
She is reported to have been made to write a letter which made it look as if she had run away from Amstetten, a small town about 130km (80 miles) west of Vienna.
The head of the criminal affairs bureau in Lower Austria, Franz Polzer, said Mr Fritzl had admitted sexually abusing his daughter repeatedly during the time he imprisoned her.
Mr Polzer said Mr Fritzl told investigators Elisabeth had given birth to seven children, including twins in 1996, but one died shortly after being born and that he had thrown the body into an incinerator in the building.
The surviving children are now aged between five and 19 years.
Wife 'unaware'
The cellar rooms, covering an area of approximately 60 sq m (650 sq ft), were equipped for sleeping and cooking, and with sanitary facilities.
A reinforced concrete door was built into the wall that separated the "dungeon" from the house and electronically locked - the code known only to the suspect, who provided his captives with food and necessities, police said.
Three of the children were kept in the cellar with their mother and had never seen daylight, police told a news conference.
The other three children were adopted or fostered by the suspect, after he forced Elisabeth to write a letter saying she could not look after the baby, according to police.
His wife, Rosemarie, with whom he had seven of their own children, appears to have been unaware of the alleged crimes, police said.
The security chief for Lower Austria, Franz Prucher, said he had been down into the cellar where it was easy to understand how the abuse was not discovered.
"The cellar is very deep," he said. "There you can cry and nobody will hear, nobody. There you can cry as loud as you can, you can hear nothing."
The alleged abuse and Mr Fritzl's apparent double life came to light when the eldest of the children in the cellar, 19-year-old Kerstin, became seriously ill earlier this month and had to be taken to hospital.
Kerstin is said to be in a coma in hospital.
The media were told the other children who had been kept in the cellar were in surprisingly good physical health, but very pale.
The BBC's Bethany Bell says the case is reminiscent of that of Natascha Kampusch, the Austrian teenager held captive in a cellar in a house in a Vienna suburb for eight years, who ran to freedom in 2006.
Our correspondent says the people of Amstetten are in a state of shock over the events in their town, compounded by the sudden worldwide media interest.
Source: http://news.bbc.co.uk/2/hi/europe/7372477.stm
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Timeline: Austrian cellar case
A timeline of events in the case of a woman in Amstetten, Austria, whose father apparently confessed to holding and sexually abusing her for 24 years in his cellar, during which time she is believed to have given birth to seven of his children.
The events included are based on Austrian police statements issued after the arrest of the 73-year-old father.
28 AUGUST 1984
The suspected abductor, Josef F, allegedly lures his daughter Elisabeth into the cellar of their house, drugging and handcuffing her before locking her up.
DATE UNKNOWN
Josef and his wife Rosemarie receive a letter in Elisabeth's handwriting saying they should not try to look for her. Rosemarie is unaware of the truth, Elisabeth later tells police.
1988-89 (APPROXIMATELY)
Kerstin, the first of seven reported children, is secretly born (exact date unknown) and raised in the cellar. She is followed shortly by a brother.
1993
A baby is discovered outside the family home along with a letter from Elisabeth saying she cannot care for it. It is taken in by Josef and his wife. A second infant appears in 1994. Both are either fostered or adopted, and are raised by their grandparents.
1996
Twins are born to Elisabeth but one dies shortly after birth and is allegedly taken away and burnt by Josef. The following year, a third infant appears at the house, and is taken in like the previous two, to be raised by grandparents.
2003
A letter arrives from Elisabeth to say she had another baby in December 2002. This child is believed to have been brought up in the cellar along with Kerstin and her brother.
SATURDAY 19 APRIL 2008
Police issue an appeal to missing person Elisabeth F to contact them about her daughter Kerstin, who has been admitted to hospital in Amstetten with a serious illness.
19-26 APRIL 2008
At some point during the week, according to the police statement, Josef releases Elisabeth and the two other children from the cellar, telling his wife Rosemarie she has chosen to return home.
SATURDAY 26 APRIL 2008
Police pick up Josef and Elisabeth near the Amstetten hospital where Kerstin is being treated. Elisabeth's children are found at the house.
SUNDAY 27 APRIL 2008
Police announce the arrest of Josef on suspicion of incest and abduction. All the children are placed in care and Elisabeth is given medical and psychological treatment.
Josef gives police the code to unlock a hidden door to a basement living space made up of a network of tiny windowless chambers.
MONDAY 28 APRIL 2008
Josef confesses to imprisoning Elisabeth in a cellar for 24 years and fathering her seven children. He confirms to investigators that one of their children died in infancy and that he had taken the dead body and thrown it into an incinerator.
Police search Josef's basement. Kerstin remains in hospital, in a serious but stable condition.
Source: http://news.bbc.co.uk/2/hi/europe/7370208.stm
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