The Republican nominee had claimed at rallies twice this week that such a video existed, saying in Maine on Thursday that it was provided by Iranians "to embarrass our president because we have a president who's incompetent."
What Trump had actually seen in news reports was video of three American prisoners who Iran had released arriving in Geneva, Switzerland.
Trump admitted his error in an early-morning tweet Friday, without actually saying he was wrong.
"The plane I saw on television was the hostage plane in Geneva, Switzerland, not the plane carrying $400 million in cash going to Iran!" he tweeted.
It was a rare reversal for Trump, who has stood by inaccurate or unproven claims previously -- insisting he'd seen videos of Muslim Americans in New Jersey cheering the September 11, 2001, attacks. His political rise began during the 2012 campaign, when he insisted that Obama release his birth certificate, questioning the President's American citizenship.
Democratic vice presidential nominee Tim Kaine hit Trump on Friday for the video claim, saying he seems "confused" on CBS' "This Morning," in an interview taped before Trump backtracked.
"I have no idea what he's talking about. It (the video) doesn't exist. He might be thinking about Iran Contra from like 35 years ago or something like this," Kaine said.
He pointed to Trump's recent criticism of Kaine, who Trump said in a late-July news conference "did a terrible job in New Jersey" -- despite Kaine being a governor and senator from Virginia, not New Jersey. Kaine said Trump must have confused him with Tom Kean, who was New Jersey's governor until 1990.
"He was confusing it with a situation from two or three decades ago. Maybe that's what he's doing with this bogus video claim," Kaine said.
Asked if he thinks Trump is confused, Kaine said: "I absolutely think he's confused."
Paul Manafort, Trump's campaign chairman, responded to Kaine on Fox News Friday morning, saying he's "not sure there was confusion" on Trump's part.
"The point that he was making is the cash-transfer took place and it was taking place consistent with the transfer of hostages," Manafort said.
"Again, what the Obama administration wants to do is get off of the point. The point is, $400 million in cash that most likely ended up in terrorist camps used against the west was given in exchange for hostages and the President of the United States lied to the American people, that's the point."
Trump has made criticism of the US delivery of $400 million in cash via a plane to Iran -- the first installment of $1.7 billion in payments related to a decades-old dispute over an unfulfilled us arms purchase before the Iranian revolution cut relations between the two countries and settled at the same time Iran released four American prisoners -- a staple this week on the campaign trail.
But Wednesday in Florida and Thursday in Maine, he went a step further, claiming he'd seen video of the cash actually being delivered in Iran.
"It was interesting because a tape was made. Right? You saw that? With the airplane coming in -- nice plane -- and the airplane coming in, and the money coming off, I guess. Right? That was given to us, has to be, by the Iranians," Trump said in Portland, Maine.
"And you know why the tape was given to us? Because they want to embarrass our country. They want to embarrass our country. And they want to embarrass our president because we have a president who's incompetent. They want to embarrass our president," Trump said. "I mean, who would ever think they would be taking all of this money off the plane and then providing us with a tape? It's only for one reason. And it's very, very sad."