North Korea stated that she strayed into their territorial waters, but the United States maintains that the vessel was in international waters at the time of the incident. More recently, facts have come to light that indicate that USS Pueblo was captured by North Korea at the instigation of the Soviet Union, which was seeking a cryptographic machine onboard to match with a key provided to the Soviets by the spy John Walker.
On January 5, 1968, Pueblo left for Sasebo, Japan. She left Sasebo on January 11 with specific orders to intercept and conduct surveillance of Soviet naval activity in the Tsushima Straits and to gather signal and electronic intelligence from the Democratic Peoples Republic of Korea.
The next day, two DPRK fishing trawlers (Lenta Class) passed within of Pueblo. That day, a North Korean unit made an assassination attempt against South Korean leadership targets, but the crew of Pueblo were not informed.
According to the American account, the following day, January 23, Pueblo was approached by a sub chaser and her nationality was challenged, Pueblo responded by raising the U.S. flag. The DPRK vessel then ordered her to stand down or be fired upon. Pueblo attempted to maneuver away, but was considerably slower than the sub chaser. Additionally, three torpedo boats appeared on the horizon and then joined in the chase and subsequent attack. The attackers were soon joined by two MiG-21 fighters. A fourth torpedo boat and a second sub chaser appeared on the horizon a short time later. The ammunition on Pueblo was stored below decks, and her machine guns were wrapped in cold-weather tarpaulins. The machine guns were unmanned, and no attempt was made to man them.
U.S. Naval authorities and the crew of the Pueblo insist that before the capture, Pueblo was miles outside North Korean territorial waters; the Koreans claim the vessel was well within the DPRK's territory. The mission statement allowed her to approach within a nautical mile (1.852 km) of that limit. The DPRK, however, claims a sea boundary even though international standards are .
The North Korean vessels attempted to board Pueblo, but she maneuvered to prevent this and a sub chaser opened fire with a 57 mm cannon. The smaller vessels fired machine guns into Pueblo, which then signaled compliance and began destroying sensitive material. The volume of material on board was so great it made it impossible to destroy all of it.
Radio contact between the Pueblo and the Naval Security Group in Kamiseya, Japan had been ongoing during the incident. As a result, Seventh Fleet command was fully aware of Pueblo's situation. Help was promised but never arrived. More than likely, no one wanted to take responsibility for an attack on North Korean vessels attacking Pueblo. By the time President Lyndon Johnson was awakened, Pueblo had been captured and any rescue attempt would have been futile.
Pueblo followed the North Korean vessels as ordered, but then stopped immediately outside North Korean waters. She was again fired upon, and a U.S. sailor, Fireman Apprentice Duane Hodges, was killed. She was boarded by men from a torpedo boat and a sub chaser. Crew members had their hands tied, were blindfolded, beaten, and prodded with bayonets.
Once Pueblo was in North Korean territorial waters, she was boarded again, this time by high-ranking North Korean officials.
Commander Lloyd M. Bucher, Commanding Officer of the Pueblo, was tortured and put through a mock firing squad in an effort to make him confess. Eventually the Koreans threatened to execute his men in front of him, and Bucher relented. None of the Koreans knew English well enough to write the confession, so they had Bucher write it himself. They verified the meaning of his words, but failed to catch the pun when he said "We paean the North Korean state. We paean their great leader Kim Il Sung ("We paean" sounds almost identical to "we pee on"). Following an apology, a written admission by the U.S. that Pueblo had been spying, and an assurance that the U.S. would not spy in the future, the North Korean government decided to release the 82 remaining crew members. On 23 December 1968 the crew was taken by buses to the DMZ border with South Korea and ordered to walk south across the "Bridge of No Return". Exactly 11 months after being taken prisoner, the Captain led the long line of crewmen, followed at the end by the Executive Officer, Lieutenant Ed Murphy, the last man across the bridge. The U.S. then verbally retracted the ransom admission, apology, and assurance. Meanwhile the North Koreans blanked out the paragraph above the signature which read: "and this hereby receipts for 82 crewmen and one dead body". Commander Lloyd M. Bucher, Commanding Officer of the Pueblo and all the officers and crew appeared before a Navy Court of Inquiry. A court martial was recommended for the CO and the Officer in Charge of the Research Department, Lt Steve Harris. But the Secretary of the Navy, John H. Chafee, rejected the recommendation, stating, "They have suffered enough." Commander Bucher was never found guilty of any indiscretions and continued his Navy career until retirement.
There is some debate as to whether Commander Bucher acted within his orders. It was clearly stated in his orders that Bucher was not to spark an international incident. The Americans allege that North Korea attacked and boarded Pueblo in international waters — a clear act of war, whereas the DPRK has stated the Pueblo was in violation of the territorial limit. Historically, U.S. ships engaged in the collection of intelligence would often approach the very limits of territorial waters and sometimes cross over for brief periods of time. Such actions would often prompt the target country to mobilize parts of their military and thereby provide more intelligence for the U.S. ship to capture. The question is posed whether or not Bucher should have kept Pueblo in the area after the first encounter of a gunboat. Those familiar with the operations of the ship point out that such encounters were routine while on station, and it was expected that Bucher would remain on station in spite of such events. Further, Bucher was not informed of escalating tensions between North Korea and the South Korean-U.S. bloc in the days leading up to the capture of Pueblo. Bucher died in San Diego on January 28, 2004, partly as a result of complications from the injuries he suffered during his time as a prisoner of war in North Korea.
Pueblo is still held by North Korea. In October 1999, it was towed from Wonson on the east coast, around the Korean Peninsula, to Nampo on the west coast. This required moving the vessel through international waters. No attempt to recapture the Pueblo was made. This move was done just before the visit of U.S. presidential envoy James Kelly to the capital Pyongyang. The present location of Pueblo is in Pyongyang, an attempt to project an image to tourists of the North Koreans' strength.
The Pueblo (AGER-2) was the third ship named after Pueblo, Colorado. It remains today a commissioned ship in the U.S. Navy. It is widely, but incorrectly, believed to be the first American ship to have been captured since the wars in Tripoli. On December 8, 1941, the river gunboat USS Wake (PR-3) was captured by Japanese forces while moored in Shanghai.
During an August 2005 diplomatic session in North Korea, former U.S. Ambassador to South Korea Donald Gregg received verbal indications from high-ranking North Korean officials that the state would be willing to repatriate the USS Pueblo to United States authorities, on the condition that a prominent U.S. government official, such as Secretary of State Condoleezza Rice, come to Pyongyang for high-level talks. While the U.S. government has publicly stated on several occasions that the return of the still-commissioned Navy vessel is a priority, the current overall situation of U.S.-North Korean relations makes such an official state visit very unlikely. The U.S. government has taken the position that North Korea's nuclear weapons ambitions, human rights record, and its reputation as a sponsor of terrorism are its main concerns, and that the USS Pueblo is of low priority at this time.