Former Tory treasurer Lord McAlpine of West Green said on Friday that allegations linking him to child abuse were "wholly false and seriously defamatory".
After days of frenzied speculation, the peer released a statement vehemently denying that he abused Steve Messham or any other residents of a children's home in Wrexham, North Wales.
He said he had visited Wrexham "only once" and that was in the company of an agent from Conservative Central Office.
"I have never been to the children's home in Wrexham, nor have I ever visited any children's home, reform school or any other institution of a similar nature," he said.
"I have never stayed in a hotel in or near Wrexham, I did not own a Rolls Royce, have never had a 'Gold card' or 'Harrods card' and never wear aftershave, all of which have been alleged.
"I did not sexually abuse Mr Messham or any other residents of the children's home in Wrexham."
Lord McAlpine said that "ill- or uninformed commentators" had used the internet to accuse him of being "the senior Conservative Party figure from the days of Margaret Thatcher's leadership who is guilty of sexually abusing young residents of a children's home in Wrexham, North Wales in the 1970s and 1980s".
He said that a "substantial number of people" may have "reasonably inferred" that broadcast and newspaper reports of allegations against unnamed individuals referred to him.
"Even though these allegations made of me by implication in the broadcast and print media, and made directly about me on the internet, are wholly false and seriously defamatory I can no longer expect the broadcast and print media to maintain their policy of defaming me only by innuendo," he said.
"There is a media frenzy and I have to expect that an editor will soon come under pressure to risk naming me. My name and the allegations are for all practical purposes linked and in the public domain and I cannot rewind the clock.
"I therefore have decided that in order to mitigate, if only to some small extent, the damage to my reputation I must publicly tackle these slurs and set the record straight.
"In doing so, I am by no means giving up my right to sue those who have defamed me in the recent past or who may do so in the future and I expressly reserve my rights to take all such steps as I and my solicitors consider necessary to protect my interests."
The former deputy chairman of the Conservative Party said he had become "well known" among journalists and readers of the internet as one of the individuals implicated by Messham's allegations about abuse that was not covered by the Waterhouse Inquiry which originally investigated the scandal.
Lord McAlpine, who was named in Friday's Guardian as part of a story suggesting that he was in fact a victim of mistaken identity, said he was not accusing Mr Messham of acting maliciously. But he insisted Messham was "mistaken and that he has identified the wrong person".
"I have every sympathy for Mr Messham and for the many other young people who were sexually abused when they were residents of the children's home in Wrexham," he said.
"Any abuse of children is abhorrent but the sexual abuse to which these vulnerable children were subjected in the 1970s and 1980s is particularly abhorrent. They had every right to expect to be protected and cared for by those who were responsible for them and it is abundantly clear that they were horribly violated.
"I have absolutely no sympathy for the adults who committed these crimes. Those who have been convicted were deservedly punished and those who have not yet been brought to justice should be as soon as possible.
"The facts are, however, that I have been to Wrexham only once. I visited the local Constituency Conservative Association in my capacity as deputy chairman. I was accompanied on this trip, at all times, by Stuart Newman, a Central Office agent."
He said they had visited Mary Bell, a distant relative of his and a close friend of Newman, and they did not stay the night in Wrexham.
Newman is now dead, but Lord McAlpine's solicitors are trying to contact a senior secretary from Conservative Central Office at the time "to see if she can remember the precise date I visited that Association".
Lord McAlpine said he supported moves by Home Secretary Theresa May to assess the recent allegations and review the original police investigation.
He said he was "entirely willing" to meet the Chief Constable of North Wales Mark Polin and National Crime Agency director general Keith Bristow in London as soon as possible "so that they can eliminate me from their inquiries and so that any unwarranted suspicion can be removed from me".
"I wish to make it clear that I do not suggest that Mr Messham is malicious in making the allegations of sexual abuse about me," he said.
"He is referring to a terrible period of his life in the 1970s or 1980s and what happened to him will have affected him ever since. If he does think I am the man who abused him all those years ago I can only suggest that he is mistaken and that he has identified the wrong person."
Lord McAlpine, who now lives in Italy and says he is in poor health, issued his public denial after Prime Minister David Cameron warned that the child abuse allegations risked turning into a "witch-hunt" as internet speculation has gone into overdrive.
His name is assumed to have been among a number that television presenter Phillip Schofield took from the internet and presented to Cameron live on ITV1's This Morning on Thursday.
The move angered Number 10, who dismissed it as a "silly stunt". The Prime Minister told Schofield: "There is a danger if we are not careful that this can turn into a sort of witch hunt, particularly about people who are gay, and I'm worried about the sort of thing you are doing right now, taking a list of names off the internet."
On Friday, This Morning was facing a possible investigation after Schofield's actions led to broadcasting regulator Ofcom receiving 100 complaints about the daytime programme
Downing Street later warned against "trial by Twitter".
The Guardian on Friday quoted a Wrexham councillor Keith Gregory, himself a victim of abuse at the Bryn Estyn care home, saying that he did not believe Lord McAlpine was involved in the scandal.
Downing Street later defended the decision to launch fresh inquiries into the abuse scandal, insisting "a number" of serious allegations had been made.
The Prime Minister's official spokesman added: "Serious allegations have been made about the conduct of the police inquiry and the subsequent public inquiry and it's right we look into those and that's what we are doing.
"I don't want to get into the speculation about particular individuals. The Prime Minister made the point he made yesterday, which is if there are allegations, if there is information about particular individuals, that information should be handed to the police."
He added: "People are questioning the conduct of a public inquiry. That is quite a serious thing. As you would expect, we take that seriously. We have not reopened the public inquiry. We have asked an independent person to review the scope and conduct of that inquiry."