The Scotland international was pictured holding a Ulster Volunteer Force flag in a Sunday newspaper in a dated photograph made public by his wife, Tracy, who is currently divorcing the player.
Goram, who denies being a UVF sympathiser, retired from international football three weeks before the World Cup last summer because of attention on his private life but has since intimated he will reconsider that verdict.
There had been widespread speculation that Goram would quit the game only a month after joining the Fir Park club, but instead he denied the allegations and said he was taking legal action with support from Motherwell.
Goram also added that he was a 100 per cent supporter of the peace movement. "I categorically deny that I have any links with sectarian groups or terrorists," he said. "I do not condone violence and I wholeheartedly support the current peace process in Northern Ireland.
"I deny all the implications in these recent articles and am taking legal action against the newspapers concerned and the individuals who supplied this incorrect information. Because of the current legal situation I am unable to say any more."
Motherwell are giving Goram their full backing, saying he remains a player at the club. A statement, ratified by the owner and chairman, John Boyle, read: "Two newspapers have made serious allegations against Andy Goram. He has been accused of having links with terrorist organisations. Motherwell is a family club and takes these allegations seriously.
"As individuals, and as a club, we take no part in sectarianism. We have spoken to Andy Goram at length. He has assured us that he has been seriously maligned and misrepresented and that he is taking legal action against the newspapers and individuals concerned. He remains a player at Motherwell."
Goram is no stranger to controversy and walked out of Scotland's training camp in America last May after allegations about his private life.
He left Rangers in the summer and had loan spells with Notts County and Sheffield United before training with FC Copenhagen. However, a possible move to Denmark broke down and he returned to Scotland last month after the Premier League's winter break.
Gary Holt, the Kilmarnock midfielder, has withdrawn from the Northern Ireland squad for tonight's B international against Wales at Wrexham after it was discovered he is not eligible.
The player had claimed his father was from County Down, but the Irish Football Association checked and found out that he was referring to his stepfather, and that his real parents are Scottish.
The episode is embarrassing for the Irish Football Association, and David Curry, the secretary of the international committee, said: "Gary's parents are Scottish, so he comes under the Scottish FA's jurisdiction."
Holt is not the only absentee from the squad - Damien Johnson, the Blackburn Rovers winger, has pulled out with a knee injury.Reuse content