Lindsay Lohan is adamant that she did NOT punch anyone in the face at a club early Thursday morning, but admits she did get into an argument with Tiffany Mitchell.
She also admits calling Mitchell, a fortune teller/psychic, "gypsy."
According to sources close to Lohan, Tiffany Mitchell approached her inside club Avenue to do a palm reading of some kind, but Lindsay turned her down.
Thse she noticed Tiffany's friends crowding around her purse.
When Lindsay returned to her table, her friends told her that Tiffany's friends stole her purse - a super expensive black leather Celine - and the actress was pissed.
Lindsay says she did call Tiffany a "gypsy" but says she did not know that word is considered a slur ... guess she just thought it was a run-of-the-mill insult?
Anyway, Mitchell then told her Liz & Dick sucked, and $h!t escalated.
It's unclear if they were indeed vying for Max George's affections; The Wanted singer is said to have spurned the star and flirted with Mitchell, further angering Lohan.
As for hitting Tiffany, which got Lindsay Lohan arrested for assault, she denies it 100 percent and says she's being set up ... stop us if you've heard that one.
The actress was said to be rip-roaring drunk that night - and most nights, as she's drinking up to two liters of vodka a day - so her credibility may be suspect.
Not that it was pristine to begin with, of course.
Lindsay Lohan: Throw her in jail?