Police are investigating allegations that two Essex players were involved in "match irregularities", the England and Wales Cricket Board said on Saturday.
'The Sun' named Kaneria as one of the two players who are under investigation, prompting an angry response from the spinner.
"I don't know from where they have got their information but I have spoken to my lawyer and we are contemplating to sue them for damages," Kaneria said.
Kaneria, who has been playing for Essex for the last seven seasons, said he was devastated by the allegations, as he had always stayed clear of such controversies and scandals.
The Essex police said on Saturday that they have already initiated an investigation.
Kaneria was due to join Essex last week but was held back by the Pakistani selectors who wanted him to play in the Pentangular Cup one-day tournament as they are considering him for the Asia Cup and with the 2011 World Cup in mind.
"My association with Essex is long and I have a lot of respect out there. This controversy has hurt me badly and it is rubbish as far as I am concerned," Kaneria said.
Kaneria said that he would also be seeking advice from the Pakistan board on how to tackle the matter.
"I am just waiting for the police to complete their investigations after which I will then claim damages," he said.
Names of Pakistani cricketers have frequently been mentioned in match-fixing scandals and only recently they were rumors that the PCB was investigating Rana Naved and Kamran Akmal for under-performing on the tour of Australia.
But later the board denied that no member of the Pakistan team was involved in match-fixing or was under investigation.
Kaneria said it appeared as if there was a conspiracy against the Pakistani cricketers whenever a match-fixing issue came up.
"We are always soft targets because of what happened 10 years ago. I am devastated because it does affect my personal and professional life badly," he added.
Kaneria is due to join Essex next month and said at present they were no changes in his plan nor had the county told him anything otherwise.