Chappell disputed an anecdote in Botham's autobiography "Head On" in which the former England all-rounder says he "flattened" the Australian in a Melbourne bar in 1977 because he was ridiculing English cricket.
Chappell, 64, accused Botham of "peddling his lies" in the new book and questioned the merits of his recently acquired title, saying "someone is going to regret awarding him a knighthood."
According to Botham, nicknamed 'Beefy,' he was in the bar when Chappell started rubbishing English cricket.
"I gave him three official warnings, all of which he ignored, so the next time he started, I just flattened him," Botham wrote.
"He went flying over a table and crash-landed on a group of Aussie Rules footballers, spilling their drinks in the process."
Botham said Chappell then ran out of the door, with him in pursuit.
Chappell's version, recounted in the Bulletin magazine published Wednesday, is radically different from what he labelled Botham's "fairytale."
He claims that after a verbal exchange, Botham held an empty glass to his throat and said "I'll cut you from ear to ear."
Chappell said he told Botham that such an attack would prove he was a coward, prompting the Englishman to shove him in the chest, pushing him over in his chair.
He said his rival then suggested they settle the matter outside but the Australian replied that he didn't fight and Botham was not worth ending up in a hospital or jail cell over.
Chappell said he taunted Botham as he left and Australian fast bowler Ian Callen had to restrain the Englishman by clutching him in a bear hug.