Long time ago, a "lady" at my office started a rumor, she stated that I was involved along with two other girls and my boss in orgies, that we were his misstresses and almost took turns. He was married.... that was REALLY bad and at that time it really affected me and my image. Good for me, I caught it early and even I am not a confrontational person this time I gathered all the courage I could and called her.... I told her I knew what she was saying, I knew it was true that she started the rumor and there were no way I was making a mistake as confronting her.
I was very sad and shocked, I did not cry or scream at her, to be honest the fact that I was confronting her had me shaking head to toe. But I managed to say everything I had to say, as how cruel the inventions were, how they were affecting me and how surprised I was that none other than her, that had suffered being slamed with gossip was doing that kind of damage to persons that have never harmed her.
She could not get out of it lying or blameing someone else. She admited to it and said she did not know why she did it. She appologized and never (to my knowledge) said anything about me again.
Facing it, as difficult as it was for me was what worked. I am sure the lady was shocked at the fact that I got to it head on but without any anger, screams or extra drama, just honesty, talking from my heart and my very very hurt feelings.