The story was horrific enough when details emerged in recent days, but has opened up a new debate on Wednesday.
A gang of youths allegedly attacked a young woman and her baby early on Friday on a Paris-area commuter train.
They were supposed to have cut off the woman's hair with a pen-knife, ripped her clothes and drawn Nazi swastikas on her stomach.
Newspapers alleged the woman - who is not Jewish - was targeted because she was suspected of living in a predominantly Jewish quarter and therefore presumed to be Jewish.
The media also identified the assailants as being of African and North African origins, and many French presumed they were Muslims.
But suspicions mounted when no witnesses stepped up to corroborate the woman's claims, and train station video cameras did not capture any images of the alleged attackers.
Later on Tuesday, according to media reports, the woman retracted her accusations.
Her mother, like several other people who knew her, said she had a history of making up stories. Now, she could face up to six months in prison, and more than $9000 in fines for her lies.
French President Jacques Chirac had called the alleged attack shameful. But during his annual Bastille Day television interview, following the woman's retraction, he called the whole affair regrettable.
But Chirac said he does not regret his earlier condemnation of the alleged incident.
French President Jacques Chirac
condemned the fictitious attack
He said France is currently in a period of racist acts against Jews, Muslims, and others. He said the attacks are unacceptable and violate the country's principles.
Other politicians and religious leaders, who were swift to condemn the fabricated event, are now offering mixed reactions.
Suhaib Binshaikh, the grand mufti of Marseilles, said France's North African and African communities have been unfairly targeted.
Binshaikh said it was normal that political leaders acted quickly to denounce the alleged attack. But now, he says, they must offer words to calm the situation and to take a stand opposing discrimination against both Jews and Muslims.
France has Western Europe's largest populations of Jews and Muslims.
Roger Cukierman, head of the Representative Council of Jews in France, told French radio it was unfortunate that the young woman had fabricated her story.
He said the fact that people believed the event happened shows that a climate exists in France that supports violence.