A Spanish man who reported being assaulted has admitted that his injuries were consensual, the interior ministry has said.
Spain had been left in shock after the apparent violent homophobic assault in broad daylight in central Madrid last Sunday.
The 20-year-old victim at first said he had been attacked by eight masked men in the lobby of his apartment building in the fashionable Malasaña district.
Police initially reported that the attackers used homophobic language, slashed the man's mouth with a knife, and then carved a slur into one of his buttocks.
But the apparent victim has now admitted that the injuries were caused while he was having sex with another person.
Police officers had visited the man's apartment to take a new witness statement after questions were raised about his story. The police investigation remained open.
The investigation into the case had reopened debate in Spain on hate crimes, and protests against homophobia were still held on Wednesday evening despite the amended statement.
Spain's government had convened an urgent meeting of a committee that oversees efforts to fight hate crime.
"There is no place for hatred in our society," Spanish Prime Minister Pedro Sánchez said on Twitter.
"We will continue to work for an open and diverse country, where no one is afraid to be who they are, where we all live free and safe."
The meeting came just two months after the suspected homophobic murder of another young gay man in the north of the country.
24-year-old Samuel Luiz was beaten to death near a nightclub in La Coruña, a killing that led to thousands of people demonstrating across Spain.
"Hate crimes must be firmly condemned by politicians and society," government spokeswoman Isabel Rodriguez said, adding that PM Sánchez wants to "take a personal lead" on the issue.
Activist groups say attacks on LGBTQ people are increasing in Spain and announced plans to hold street protests in the coming days at Madrid's famous Puerta del Sol square.