Ex-model Kayden Nguyen claims she landed a job as the Under Siege star's executive assistant in February, 2009, only to discover she was expected to pleasure the actor, replacing one of two Russian girls "who were available for his sexual needs 24 hours a day, 7 days a week".
She alleges Seagal treated her "as his sex toy" and tried to fondle her breasts and force his hand down her pants on her first night as his assistant.
Nguyen is suing for damages of over $1 million (£666,000).
But Seagal's lawyer, Marty Singer, insists Nguyen is lying; he claims she only filed suit because she's still bitter about being fired for her alleged drug use.
A statement issued to TMZ.com reads: "The lawsuit filed by Kayden Nguyen against Steven Seagal is a ridiculous and absurd claim by a disgruntled ex-employee who was fired for using illegal narcotics. (The lawsuit) is a complete fabrication without a scintilla of truth."
Singer is confident Seagal's name will be cleared and the case dismissed.