Speaking to The Sunday Times newspaper the Oscar winner – who supports the Me Too movement – reveals she and her family took the allegations seriously.
A former employee of Douglas's accused him of sexual harassment, including masturbating in front of her during a script meeting in 1989.
"My children and I were profoundly devastated by those allegations. And I was torn about where my absolute morals lie," she admitted.
"This woman came out of nowhere and accused my husband. I had a very big conversation with him, with the kids in the room, and said, 'Do you understand if more comes out.
"It was a really hard position for me and, in the height of it all, it was nasty."
However, she decided to stick by her 74-year-old husband who desperately tried to reassure his family about the allegations.
And this seemed to help her cope with the adverse publicity, "By telling us that there is no story here and that time will tell. And, of course, it did," she revealed.
"There was nothing to back it up at all. For any accusation that comes out that isn't backed up, that knocks the movement back 20 years."
Zeta-Jones who has battled bi-polar depression in the past admits that she believes couples have to tough it out when it comes to making their marriages work.
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The 49-year-old said: "God knows we've had ups and downs in our marriage, but I don't throw the towel in very quickly on anything. I'm not that person.
"Not that I would white-knuckle it until the day he drops dead. Or the day I drop dead, I'm not that stupid, either."
"Michael calls me Dame Doom because I'll go to the worst-case scenario.
"I'm like a Formula One race car — zero to 200 in two seconds. I spend my life trying to bring it down."
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