The singer formerly know as Cat Stevens has won libel damages over claims he refused to talk to a women not wearing a veil.
It was also alleged that the musician, now known as Yusuf Islam, only spoke to women other than his wife through a third party.
At the high court in London, his lawyer, Adam Tudor, said: "Mr Islam has never had difficulties working with women."
An article entitled "Yusuf Islam ignores bare-headed women" was published and distributed to subscribers, including the website Contactmusic.
The site has since issued an apology.
Mr Tudor told the court that the story had caused "considerable embarrassment and distress" to Mr Islam.
"In his normal life, women feature among some of the most influential people in Mr Islam's team," he added.
The story also cast "serious aspersions, quite wrongly, on his religious faith, which is of the utmost importance to him".
The World Entertainment News Network and Contactmusic agreed to pay the singer's legal costs and pay the damages to charity.
The singer converted to Islam in 1977 and won substantial damages in 2005 after media reports claimed he supported terrorism.