Gavin Porter, 38, from Grange on Inch Island, also pleaded guilty to intentionally exposing himself.
The sex act was carried out in view of a female passenger and was recorded over a 40 minute period on an internal CCTV camera.
The BBC reports that Porter was arrested at the Foyle Street bus depot on 22 June following a complaint from the passenger.
Derry Magistrates Court was told that Porter received a five month suspended jail sentence in August 2011 for committing similar offences, in a car, in the grounds of Magee College.
Following his convictions he was placed on the sex offenders register for seven years.
The judge described his behaviour on the bus as absolutely outrageous and said it was clearly distressing for the female passenger.
The defendant was refused bail and will appear in court again on 25 September.