A lie that everyone seems to think is the truth.

The "Baa Baa White Sheep" story was a wholesale fabrication, reporting events that never happened. Nonetheless, the story "got legs" (as journalists put it) and was widely reported, modified, and re-reported by the press, to the extent that it has gained almost the status of an urban myth, being reported of people and institutions different to those of the original story of 1986. Both The Age and The Herald reported in 2002, for example, the same "Baa Baa White Sheep" story, ascribing it to a parent of a child attending Paston Ridings Primary School in London.

The original story reported a ban at Beevers Nursery, a privately run nursery school in Hackney. It was originally reported by Bill Akass, then a journalist at the Daily Star, in the 1986-02-15 edition under the headline "Now it's Baa Baa Blank Sheep". Akass had heard of a ban issued, by nursery school staff, on the singing of the nursery rhyme "Baa, Baa, Black Sheep", on the grounds that it was racialist. In his story, he wrote:

Staff at a nursery school in Hackney, London, claim that the traditional nursery rhyme is offensive to blacks. At first they wanted the 30 children aged between one and three — only two of whom are black — to sing Baa Baa White Sheep instead. But now it has been banned altogether at Beevers Nursery in De Beuvoir Road. Leaders of left-wing Hackney council welcomed the ban last night. A spokesman said: 'We consider playgroups and nurseries should be discouraged from singing the rhyme. It reinforces a derogatory and subservient use of the word "black" among our youngsters in their formative years. This is particularly important because the majority of children in our nurseries come from black and ethnic minority communities.'

—Bill Akass (1986-02-15). "Now it's Baa Baa Blank Sheep". Daily Star.

The nursery was run by the parents, rather than by Hackney council. But Akass had telephoned Hackney council for its reaction to his story, Martin Bostock, then the press officer for Hackney council, reported that he had considered the possibility of simply responding that "We don't know what this nursery is doing, but whatever they're doing it is up to them.". However, council leader Tony Millwood, according to Bostock, refused this advice and wanted to take a more supportive stance on the alleged ban, and in conjunction with the press office drafted and issued a statement saying "that we supported what they'd done, although making it quite clear that it was not a council nursery and not a council ban".

Three days later, in the 1986-02-18 Hackney Gazette, Tim Cooper took up Akass' story. He went to Beevers Nursery and asked parents there what their reactions, in turn, were to the Hackney council statement, itself a reaction to the claim that Beevers had issued a ban. Cooper's story reported one of the nursery playleaders as saying "We're run by parents and if they want us to stop singing it, we would. But there have been no complaints so far, through someone once suggested it could be racist.". Cooper later stated that there had been no such ban, but that the statement issued by Millwood and Hackney council had given the story the impetus that it was then to run with:

I think they really shot themselves in the foot. I think they issued the statement because they, or the council leader at the time, believed that the ban was in force and tried to justify it. I think that they were wrong. There was no ban in the first place. By issuing the statement they virtuall created the story, which obviously snowballed from there.

—Tim Cooper

And snowball it did. The story was carried by the Sun in its 1986-02-20 edition, under the headline "Lefties baa black sheep", with the ban attributed directly to "Loony left-wing councillors". The Sun's version of events was subsequently carried by the 1986-02-23 Sunday World. It was taken to the letters columns of the 1986-02-28 and 1986-03-04 Hackney Gazette and the 1986-03-06 Ilford Recorder, and even reached the pages of the 1986-04-04 Knitting International. Despite neither the journalists nor the letter-writers presenting any evidence for their assertions, only one paper, The Voice rejected the story in print, calling the story a deliberate attempt to discredit the council.

The 1986-10-09 Daily Mail carried the story further, with a story headlined "Baa baa, green (yes green) sheep!", reporting that Haringey (not Hackney) council had ordered playgroup leaders to attend a racialism awareness course, where they were instructed that the council had banned the rhyme with its original wording, mandating the alternative "green sheep" wording instead. This story was ascribed to an anonymous playgroup leader. From here, this new twist on the original story was carried by the Birmingham Evening Mail ("Silly bleat" and "Green sheep? They've got to be joking."), the Liverpool Echo ("Black sheep in the dog house"), the Yorkshire Evening Press ("So sheepish"), the 1986-10-10 Birmingham Post ("Racist sheep are a joke"), the 1986-10-12 Sunday People, News of the World ("Green sheep take over"), and Sunday Mercury, the 1986-10-13 Carlisle Evening News and Star ("Bernie Bleat Barmy"), the 1986-10-14 Yorkshire Evening Courier, and the 1986-10-15 Liverpool Echo ("Just Barmy") and Ipswich Evening Star ("A load of wollies!").

Again, the story was a fabrication. In fact, the playgroup leaders had requested the racialism awareness course, to which attendance was not compulsory, there had been no ban imposed by Haringey council, and there was no evidence that the rhyme had even been discussed on the course. As before, only newspapers for the British black community reported these facts. The Daily Mail's attempts to fact check the story that it had run, including posing as parents looking for playgroups and as supermarket managers wanting to run racialism awareness courses, had failed to elicit a single playgroup worker who would confirm the alleged council ban.

Haringey council attempted to get the story straightened. It initiated legal action against the Daily Mail, but was forced to drop it for lack of funds. The attempts by the council to rebut the story were ignored by the press for a week, its rebuttal only being first printed in the 1986-10-16 Haringey Advertiser ("Black sheep still in evidence"). But that was not enough to stem the tide, as the story was now running, without independent fact checking, in newspapers all across the country, from Men's Wear to the 1986-10-19 Sunday Times letters column, the 1986-10-23 Hendon Times ("Stop stirring up trouble"), and Auberon Waugh's column in the 1986-10-19 Sunday Telegraph. The 1986-10-23 Mail on Sunday letters column carried letters noting that black pudding was henceforth to be "green pudding", the same day's Sunday Times letters column noted that blackheads could no longer be called blackheads.

The Daily Mail ran the story again on 1986-10-20, comparing Haringey council to Nazi Germany. Again, the council attempted to set the record straight, with a press statement that noted the irony of the Daily Mail comparing the council to Nazi Germany when the Mail itself had supported Hitler right up until the eve of World War Two. And again, only the British black community newspapers (the 1986-11-03 Asian Herald and the 1986-11-05 West Indian News) carried Haringey council's corrections. The story continued to be carried by many newspapers for months thereafter, including The Economist on 1986-11-01 and the Islington Gazette on 1987-02-20, this time with Islington council as the ban-issuer, a fact that was explicitly denied by a council spokesman in the piece, who said "it is not council policy to ban Baa Baa Black Sheep but if individual nursery workers find it offensive the council is not the business of forcing them to teach that rhyme rather than others". The Daily Express carried the new Islington variant on the same day ("School bars boy's Baa-baa Black Sheep 'racist' rhyme"), as did the Daily Telegraph ("Boy's first rhyme upsets nursery staff"), the Daily Mirror ("Baa Baa blacked"), and the Sun ("Baa Baa nursery ban on sad little Dan") whose lead article the next day then began with "Loony left councils have given us a good laugh over the years.".

Even other political parties ran with the story. A party election broadcast for the Social Democratic Party, fronted by John Cleese, named Islington council as "the council that accused a five year old of reciting a racially offensive poem". Islington council sought an injunction in the High Court to have this material excluded, but this was denied by Mr Justice Drake. David Owen dropped the material anyway, stating that it was to avoid further distress to the five-year-old's family. Ironically, the press reported Owen's press conference, announcing this change, as "loony" David Owen "outclowning anything that Basil Fawlty could have thought up".

Two newspapers recognized that the story had no foundation. The Yorkshire Evening Press printed on 1986-11-14 a correction to its earlier story, stating that "We regret that the editorial, which was written in good faith, was based upon an inaccurate report.". The Birmingham Evening Mail published a letter from Bernie Grant on 1986-10-22 denying the story. Nonetheless, and despite the corrections, court actions, and attempts to set the record straight, the story has refused to die. The 1998-02-08 Sunday Times, for example, re-hashed the story once again, eleven years after the fact, in a story about Margaret Hodge, former leader of Islington council. So, too, did the Daily Mail on 1999-10-04. The London Evening Standard in 2000-07-06 reminded readers of Islington's reputation of being "one of the country's most celebrated loony Labour councils", again printing as fact the claim that Islington was where "Baa Baa Black Sheep was banned for being politically incorrect". Further stories about Hodge's ministerial promotions, in the 2003-06-14 Sun and the 2003-09-28 Daily Mail, also repeated this claim and attached it to Hodge.