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"It didn't happen," Netanyahu said at the court in Tel Aviv, where he and his wife entered under tight security to testify in their defamation suit against the journalist who made the claim on social media.
His hands behind his back, his face tense, Netanyahu said, "it is so false, so absurd, ridiculous".
The case has been closely followed by the Israeli media, with the unusual scene of a sitting prime minister and his wife, Sara, testifying in court over such a claim making headlines.
It follows a post by a journalist on his Facebook account last year making the claim, resulting in the Netanyahu's defamation suit.
The journalist, Igal Sarna, posted that a fight between the Netanyahus had occurred while they were travelling as part of the premier's official convoy on a highway between Tel Aviv and Jerusalem.
According to Sarna, who works for the popular Yediot Aharonot newspaper, Netanyahu was forced out of the car amid shouting.
The Netanyahus are a frequent topic of gossip and rumours among Israelis, and Netanyahu said he wanted the truth to be known in this instance.
They are suing for 280,000 shekels (USD 76,000, 72,000 euros).
Netanyahu held his wife's hand when arriving at the courtroom, where dozens of people were kept out due to a lack of space.
During his testimony, he denounced what he called the "vulgar lie...That led me here".
Questioned by Netanyahu's lawyer, Sarna said he believed "more than ever" that the incident had occurred.
Asked why had he not produced any witnesses to corroborate the story, he said that his sources "do not want to come. I cannot force them to come".
Sara Netanyahu said with a tense smile that "I am here because I am looking for the truth."
"If I had to sue over all the lies against me over the last 20 years, I would have spent all my days in court," she said.
But she called Sarna's claim among the "very bad lies".
Another hearing is set for May 18.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)