Kevin Clash denies the allegations first reported by TMZ but says that he had a consensual relationship with a man, who is now 23, that occurred when the accuser was of legal age.
"I am a gay man. I have never been ashamed of this or tried to hide it, but felt it was a personal and private matter," Clash, 52, tells PEOPLE in a statement via his personal rep.
"I had a relationship with the accuser," his statement continues. "It was between two consenting adults and I am deeply saddened that he is trying to characterize it as something other than what it was. I am taking a break from Sesame Workshop to deal with this false and defamatory allegation."
Sesame Workshop officials said in a statement released to PEOPLE that they have investigated the claims and found that the underage sex allegations could not be substantiated.
"Although this was a personal relationship unrelated to the workplace, our investigation did reveal that Kevin exercised poor judgment and violated company policy regarding internet usage and he was disciplined," the company said in a statement.
Sesame Workshop officials told PEOPLE that the character Elmo would survive despite the scandal, saying, "Elmo is bigger than any one person and will continue to be an integral part of Sesame Street to engage, educate and inspire children around the world."
Reporting by CHARLOTTE TRIGGS