Veena Malik appears topless on the front of the December issue of FHM India, sparking outrage among conservatives in Pakistan - both for her nudity and the reference to Pakistan's intelligence agency.
But Miss Malik has strongly denied posing for the lads' mag, with the 33-year-old star insisting the picture had been 'morphed'.
'I have never posed nude. I have never done anything like that ever. My manager and legal team is looking into the matter. We will take legal action against them,' Miss Malik told PTI, the Indian press agency.
FHM India's editor, Kabeer Sharma, insisted however that nothing had been doctored, and claimed that the magazine could prove the photo's authenticity.
Mr Sharma told the BBC: 'We have video footage of the shoot as well as emails from Veena about how she's looking forward to the cover.'
The image was revealed on FHM India's website, Facebook page and Twitter account simultaneously today.
The revealing picture shows shows Miss Malik nude, with her arms and one leg positioned to conceal her breasts and pubic area.
On her arm are emblazoned the initials 'ISI' - the acronym for Pakistan's feared Inter-Services Intelligence agency - with the tag line, 'hand in the end of the world too?'
Mr Sharma said the reference to Pakistani intelligence was meant to be light-hearted, saying: 'In India we joke about this... if anything goes wrong... we say the ISI must be behind this.'
Miss Malik is no stranger to controversy. In January she attacked attacked hardline clerics in Pakistan who demand modest Muslims should be suitably covered at all times.
'If a woman is cool with wearing a burqa, she should wear a burqa. If a woman, being a Muslim, wants to wear jeans, then she should wear jeans,' she said in an interview with The Australian newspaper.
She also launched a stringent attack on honour killings, highlighting that women were always the target and not men.
'Have you ever heard that they've thrown acid in a guy's face in Pakistan?,' she asked.
After making her name has a star in 'Lollywood' movies - the term used to describe films made in Lahore - she found greater fame when she took part in Big Boss 4, the Indian version of Big Brother, last year.
Dressed in shorts and seen hugging actor Ashmit Patel as well as swimming with Baywatch star Pamela Anderson, she was accused of behaving improperly by some Muslim clerics.
Miss Malik has also been accused of being a porn star. However, her refreshingly outspoken views have won her many fans from Pakistan's younger and more liberal circles.
Confronted about her 'immoral' behaviour by cleric Mufti Abdul Qawi on a TV talk show, she snapped back that the country had far more important things to consider - including the rape of children in mosques.
'I’m a Muslim woman, and I know my limits,' she shouted back. The mufti appeared to be too astounded to respond.
Once again Veena Malik has become talk of the town as her nearly nude picture has appeared on the front cover of an Indian magazine but she says it is not her photo.
The Federal Interior Minister has said while talking to media today that at the moment he is unable to comment on this issue.