The authenticity of the film, which follows Phoenix over the course of a year as he attempts to become a hip hop artist, had previously been shrouded in mystery.
However, despite recently insisting that the movie was not a hoax, Affleck has now admitted that the film and Phoenix's change of career were indeed fake.
He made the admission to the New York Times, adding: "It's a terrific performance; it's the performance of his career. I never intended to trick anybody. The idea of a 'hoax' never entered my mind."
Affleck, who made his directorial debut with the picture, said that most of the film was not real - including the opening shots of Phoenix apparently swimming with his siblings in Panama, which were actually shot in Hawaii with actors.
"There were multiple takes, these are performances," he continued. "We wanted to create a space. You believe what’s happening is real."
He also acknowledged that Phoenix's infamous interview on The Late Show with David Letterman last year was all part of the act, although he insisted that Letterman himself was not in on the secret.
Phoenix is to appear on the chatshow again next week, and Affleck revealed that his long-time friend would not be appearing in character this time.
I'm Still Here received a limited release in the US last week, and opens in UK cinemas today.