She said the consequences of a conviction would outweigh the gravity of the offence.
Judge Cunningham said the man had stopped drinking. She said he had already paid a high price in his personal life and work life.
"He's a talented New Zealander. He makes people laugh. Laughter is an incredible medicine and we all need lots of it.''
The man went to bed with his partner after returning home drunk from a Christmas work party in December 2009. After he fell asleep, his four-year-old daughter came into the couple's bedroom and got into bed with them.
Judge Cunningham read from the police summary which said the man laid his daughter on her back, pulled down her pyjama pants and nappy and kissed her.
The man's partner woke up and asked him what he was doing. He replied: "I thought it was you.''
He later told police that he remembered nothing of the incident.
Judge Cunningham said a report from a forensic psychiatrist found that the man had previous episodes of "unusual behaviour'' after going to bed drunk.
The report said it was possible that the man was "not fully awake'' when he performed the indecent act.
Judge Cunningham said she had also viewed the police video interview with the four year-old.
"What struck me about it was the wish of this child to see and be with her father again.''
The man's partner, who also has permanent name suppression, wept as she told the court that she and her daughter had been having counselling.
"While we were together [the man] was a great Dad who was very supportive, loving and hands on. I always thought of him as a great guy.''
But she said the pair ended their five-year relationship after the incident happened.
"It was a tremendous shock. All of a sudden I didn't know who this man was. My only choice was to call police to protect my child.''
Crown prosecutor Joshua Shaw told the court that although the man was drunk and in a deep sleep at the time of the offending, people convicted of sexually abusing children were usually sentenced to between 12 and 18 months in prison.
"The offending cannot be seen as less serious because alcohol was a factor.''
Mr Shaw said while the Crown was not asking for a prison sentence, a discharge without conviction was "not in the ballpark''.
"It entirely undercuts the deterrent aspect. There is effectively no sentence.''
The man's lawyer, Marie Dyhrberg, said her client should be allowed to keep his record clean.
She said a conviction would make it hard for her client to work again as a comedian.
Ms Dyhrberg said the incident had caused "absolute devastation'' to everyone involved.
She said the source of the offending was alcohol but the man "won't go near alcohol for the rest of his life''.
The man was to stand trial in March but pleaded guilty to a lesser charge on the morning of his trial.
He had previously been charged with unlawful sexual connection but that charge was dropped after discussions between his lawyers and the Crown in closed court.
