The England manager was left deeply embarrassed after a News of the World reporter, posing as a wealthy Arab sheikh, extracted an admission that he would be interested in quitting England to take over as manager of Aston Villa after the World Cup this summer.
The Swede was reported to have described Rio Ferdinand as "lazy," and claimed Michael Owen was only at Newcastle for the money, as well as boasting of his close relationship with England captain Beckham.
Eriksson has not contested the paper's account of his remarks but claims that they were distorted by being taken out of context.
In the legal action, lawyers for Eriksson and his agent Athole Still will attempt to convince England's High Court that the newspaper had been guilty of an illegal "breach of confidence."
Although many members of the Football Association hierarchy were unhappy that Eriksson could have been naive enough to fall into the NoW's trap, the governing body has made it clear the Swede's position is not under threat.
Eriksson was similarly embarrassed in 2004 when it was revealed that he had held talks with Chelsea about the managerial vacancy eventually filled by Jose Mourinho.
The Swede is under contract with England until 2008 on a reported four million pounds a year salary.
He admitted on Friday however that he expects to be sacked in the summer if England do not reach the semi-finals of the World Cup and that he would step down should England win the tournament.
The News of the World's "sting", described by Eriksson as "a kick under the belt," was mounted after the Swede was invited to Dubai.
A statement from Eriksson's legal representatives said he had gone to the Gulf city at "the invitation of an apparently legitimate company to discuss the possibility of a future sports development consultancy.
"It is now clear that this was all a highly sophisticated deception by the newspaper. The resulting articles were a gross invasion of privacy, and the discussions, which our clients were expressly asked to keep confidential, were reported out of context in a distorted and sensationalised manner so as to provide a spurious pretext for the headlines which appeared."
A judgement in favour of Eriksson would have far-reaching implications for the British media.
Operations such as this one which snared the coach are common enough for Eriksson to have been ridiculed for failing to have spotted the News of the World's "fake sheikh," the alter ego of the tabloid's star reporter, Mazher Mahmood.
The reporter famously used the disguise to expose Queen Elizabeth II's daughter-in-law, Sophie, Countess of Wessex, for exploiting her royal connections to the benefit of the PR firm she worked for.
He has also used the disguise to secure incriminating evidence against celebrity drug dealers and News of the World lawyers are likely to mount a 'public interest' defence of his methods.