Last week, in an article that was later deleted, the outlet had reported that the Sydney Theatre Company had received the complaint after the 66-year-old star had starred in a 2015-2016 production of "King Lear".
A couple of days after the allegation was made public, Rush stepped down as the president of the Australian Academy of Cinema and Television Arts (AACTA).
In his defamation suit, Rush claims the Daily Telegraph made him out as a "pervert" and "sexual predator" with their "KING LEER" headline, according to Australia's ABC Radio.
"The Daily Telegraph has made false, pejorative and demeaning claimssplattering them with unrelenting bombast on its front pages. This has created irreparable damage to my reputation, been extremely hurtful to my wife, my daughter and my son; to my extended familyand to many colleagues in the Film, Television and Theatre industry. The situation is intolerable and I must now seek vindication of my good name through the courts," the "Pirates of Caribbean" star added.
A hearing at the Federal Court in Sydney has been set for February 8, the newspaper said.
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