Witness John Chandler told the South Australian Supreme Court on Wednesday that Rajini Narayan said she started the fire in her family's home which caused the death of her husband Satish Narayan in 2008.
The 46-year-old woman has been accused of pouring petrol over her husband and setting him on fire because she believed he was cheating on her.
Mr Chandler said after the blaze took hold of the suburban Unley townhouse, he saw the Narayan family standing outside.
He said the accused told him she was sorry and that she started the fire.
When he told her not to worry, he said she responded by telling him he didn't understand what she was saying.
"She said: 'No, no, you don't understand. I thought my husband was having an affair, I only wanted to burn his penis. I wanted to disfigure his penis so no other woman would want to look at it'," Mr Chandler told the court.
Under cross-examination Mr Chandler was questioned about when he had first related this exact information to the police.
Mr Narayan suffered burns to 75 per cent of his body and died in hospital several weeks later.
The fire also caused serious damage to the townhouse but there were no other injuries.
In other evidence today, Mr Chandler's wife Margaret told how she heard a scream and glass breaking before she fled outside to see flames coming from the building.
She also told of seeing the Narayan family outside and said at that stage Satish looked like a pirate.
"His trousers were in shreds," she said.
Mrs Chandler said he also looked like he had a white shirt on but that could have been burnt skin.
"I think he was burnt," she said.
"I knew there was something wrong with the way he looked."
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