The report by the online news site Gizmodo comes with Facebook under fire for allowing hoaxes and misinformation to go viral and -- according to some critics -- boost the efforts of Republican Donald Trump in his successful presidential run.
Facebook denied the report.
Gizmodo, citing unnamed sources said to be knowledgeable about Facebook's decision-making, said the tool was shelved after a controversy over reports saying the social network suppressed some conservative voices in its "trending topics" earlier this year.
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"They absolutely have the tools to shut down fake news," Gizmodo quoted one source as saying. "There was a lot of fear about upsetting conservatives after (the uproar over) trending topics."
A Facebook statement said that the claims made in the article were "not true."
"We did not build and withhold any News Feed changes based on their potential impact on any one political party," the statement from Facebook said.
"We always work to make News Feed more meaningful and informative, and that includes examining the quality and accuracy of items shared, such as clickbait, spam and hoaxes."
Facebook chief Mark Zuckerberg has rejected the idea that bogus stories shared at the social network paved a path of victory for Trump.
"The idea that fake news on Facebook, which is a very small amount of the content, influenced the election in any way I think is a pretty crazy idea," Zuckerberg said during an on-stage chat at Technonomy, a technology trends conference in California.
In a weekend posting, Zuckerberg said dealing with hoaxes and fake news is complex.
"This is an area where I believe we must proceed very carefully," he said.
"Identifying the 'truth' is complicated. While some hoaxes can be completely debunked, a greater amount of content, including from mainstream sources, often gets the basic idea right but some details wrong or omitted."
The notion of hoaxes and fake news remained a topic of debate on Monday, when internet users searching on Google were delivered a bogus report saying Trump won the popular vote in addition to the Electoral College.
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The numbers on a blog called 70News -- contradicting official results tallied so far by states -- said Trump received 62.9 million votes to 62.2 million for Hillary Clinton.
The blog urged those petitioning for the Electoral College to switch their votes to reflect popular will to scrap their effort.
"Hey Change.org, scrap your loony petition now," the posting said.
The bogus site was listed at the top of many search queries for "final election result."
Preliminary tallies showed Clinton won roughly 700,000 more votes than Trump despite losing the states needed for an Electoral College victory.
Google seeks "to provide the most relevant and useful results for our users," a company statement to AFP said.
"In this case we clearly didn't get it right, but we are continually working to improve our algorithms."
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