The married actor, who has repeatedly denied being gay in the past, was said to have touched the unnamed therapist's genitals during a $200-per-hour massage appointment, the lawsuit claimed.
The suit claimed that Travolta stripped naked - and appeared aroused - before being massaged while at the same time trying to remove the towel covering his bottom.
After the session was over, Travolta allegedly touched the man's scrotum and penis.
But the masseur insisted he pulled away and claimed he then informed the actor that he was a professional masseur and not a prostitute.
Travolta is then said to have responded that 'we must have got our signals crossed', before adding: 'Come on dude, I'll jerk you off.'
According to the report at the time, the star is then said to have suggested a 'reverse massage', which is believed to mean that he wanted the masseur to lie on the table while the actor gave the man a full body rub.
The lawsuit was filed at the US District Court of Central California. The document claimed that during the encounter Travolta also masturbated.
During that particular incident, Travolta claimed the accusation were 'fiction'.
The lawsuit sought more than $2 million in damages.
At the time, a spokesperson for Travolta issued a vehement denial: 'This lawsuit is complete fiction and fabrication. None of the events claimed in the suit ever occurred.
'The plaintiff, who refuses to give their name, knows that the suit is a baseless lie…On that date when plaintiff claims John met him, John was not in California and it can be proved that he was on the East Coast.
'Plaintiff's attorney has filed this suit to try and get his 15 minutes of fame. John intends to get this case thrown out and then he will sue the attorney and Plaintiff for malicious prosecution.'
Okorie Okorcha, the lawyer representing the masseur told
RadarOnline.com: 'My client is afraid of John Travolta.
He added: 'Mr. Travolta made very explicit threats against my client, which are contained in the lawsuit.
'Specifically, John Travolta told my client that Hollywood is controlled by homosexual Jewish men who expect favors in return for sexual activity.
'Let's face it, John Travolta is an extremely powerful man, and my client absolutely felt threatened by Mr. Travolta. My client was sexually assaulted by Mr. Travolta and he needs to be held accountable for his actions.'