Actor Daniel Baldwin pleaded not guilty Tuesday to felony charges that he illegally took another person's car, and a judge canceled a warrant for his arrest.

Baldwin entered his plea to one count each of unlawfully taking a car and receiving stolen property. He could face up to three years in prison if convicted.

The warrant had been issued after Baldwin failed to show up for a Feb. 6 court date to face the charges.

Ken Smith, owner of the white 2003 GMC Yukon that Baldwin was arrested for taking, also appeared in court Tuesday. Baldwin's attorney, Stephen Hoagland, says Smith is a longtime friend of the actor and can vouch that the car was borrowed, not stolen.

Baldwin, the 46-year-old brother of actors Alec, William and Stephen Baldwin, told reporters after the hearing that it was a misunderstanding.

"Unbeknownst to the owner of the car, his cousin had lent me the keys," Baldwin said. "I believe firmly that by the time this investigation is over with, the Orange County district attorney's office will be satisfied with the fact that I'm telling the truth."

Hoagland had hoped the charges would be dismissed immediately, but the district attorney's office wasn't ready to forget the case.

"We welcome any new evidence and we will review it," district attorney's spokeswoman Farrah Emami said. "We'll see what happens after we take a look at the case."

Baldwin has been free on bail since he was arrested with the car at a Santa Monica hotel in November after police got a signal from the vehicle's security system.

The second-eldest Baldwin brother has appeared in the television series "Homicide: Life on the Street" and the movie "Car 54, Where Are You?"