The Sydney Morning Herald newspaper reported that Mr Leunig submitted the first entry in a controversial contest in Iran for cartoons of the Holocaust.
The competition was launched by Iran’s biggest selling newspaper, Hamshahri, in retaliation for Muslim outrage over cartoons lampooning the Prophet Mohommed in European newspapers.
The newspaper said it wanted to test the limits of Western freedom of speech.
The first cartoon shows a poor man with a Star of David on his back walking towards the Auschwitz death camp in 1945 with the words “Work brings freedom” over the entrance.
The second shows the same scene but depicting “Israel 2002” with the slogan “War Brings Peace” over the entrance and the same man walking towards it bearing a rifle.
In cooperation with a website called Irancartoons.com, the Hamshahri newspaper quoted Mr Leunig as saying he was submitting a cartoon as a show of solidarity with the Muslim world.
But Mr Leunig has denied the claims.
“This is a fraud and hoax emanating, we believe, from Australia,” Mr Leunig said.
The cartoonist said he was shocked that the website also carried words claiming to be stated by him.
“I’ve been set up horribly, maliciously.”
Mr Leunig said he had received anonymous emails recently, but did not know if the two incidents were related.
"I've had a few emails recently, anonymous emails taunting me to enter this competition.
"'Come on you'd be a natural', said one of them."
He said the Iranian newspaper had since withdrawn the cartoons from the competition after he contacted the editors.
"A reply came back, they were sorry, they removed the cartoon instantly without a qualm and with an apology."