Lord McAlpine has "no choice" but to take legal action over claims of abuse at a north Wales children's home, the Conservative peer's solicitor has said.
Andrew Reid said claims linking the peer to alleged historical child abuse were "false and seriously defamatory".
The solicitor was critical of the BBC's Newsnight, on which claims were made although no-one was named.
The BBC said the Newsnight broadcast had voiced concerns raised by an abuse victim, in the public interest.
Steve Messham, a former resident of the Bryn Estyn children's home in Wrexham, last week claimed on Newsnight that he had been abused by an unnamed senior politician of the Thatcher era at the home.
Mr Messham called for a new investigation claiming a report by Sir Ronald Waterhouse in 2000 had not uncovered the full scale of the abuse.
In a statement on Friday, Lord McAlpine, 70, who was Conservative Party treasurer from the late 1970s until 1990, said he had been named on the internet and by implication by other media over the claims and was issuing a denial "to set the record straight".
Some newspapers on Friday reported that the peer had been a victim of mistaken identity.
Asked by BBC Radio 4's PM programme if Lord McAlpine would take legal action, Mr Reid said: "Sadly he has no choice.
"We need to take a number of different actions. Firstly to try to get this taken down from the internet, which is not going to be easy.
"Then we have to look at Newsnight and... the way in which they behaved, the way they trailed, they made it obvious who it was, or who they alleged it was by referring people to the internet.
"And all the others who have used the internet and just let people know where to go and find the answer because they made these statements recklessly."
Former solicitor-general Sir Edward Garnier QC has been instructed to act on behalf of Lord McAlpine's solicitors.
In his statement, Lord McAlpine said he wanted to "tackle these slurs and set the record straight".
He said: "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.
"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, whose grandfather founded the McAlpine construction firm, is a life peer who took the title of Baron McAlpine of West Green in Hampshire.
He became Conservative Party Treasurer in the late 1970s and held the post until 1990. He now lives in Italy.
The peer, who has been married three times and has three children, said there had been a "media frenzy" surrounding the child abuse allegations in Wales and "ill- or uninformed commentators" had used the internet to accuse him of something he had not done.
A BBC spokeswoman said: "Newsnight broadcast an investigation into alleged failures in a child abuse inquiry. It worked with the Bureau of Investigative Journalism to give a voice to concerns raised by an abuse victim.
"It was in the public interest to air these. We did not name any public figure for legal reasons. It is now for the inquiries announced by the home secretary to dig deeper into Mr Messham's concerns."
Newsnight is already the subject of a BBC inquiry, headed by ex-Sky News boss Nick Pollard, into why the programme dropped an investigation into sexual abuse claims against Jimmy Savile last year.