kevin clash elmo sheldon stephens*The Elmo/Kevin Clash/underage sex story continues to make waves.

TMZ is reporting that Clash, the voice “Sesame Street” character/puppet Elmo, agreed to pay his accuser, Sheldon Stephens, $125,000 – with one string attached – that Stephens recant his story that Clash had sex with him when he was a minor.

RELATED: New Problem for Kevin Clash: Accuser Says He Didn’t Lie – Wants out of Settlement

Originally, Stephens alleged he was only 16 when Clash began a sexual affair with him. Clash has acknowledged an affair, but insists it started when Stephens — now 23 — was an adult.

Multiple sources tell TMZ … hours before Stephens recanted his underage sex allegation, a settlement was struck between the two parties.  Under the terms of the settlement, Clash agreed to pay Stephens $125k.  But the settlement then provides the following:

“Stephens agrees that immediately upon execution of this Agreement, his counsel, Andreozzi & Associates, P.C., shall release the [following] statement … ‘He [Stephens] wants it to be known that his sexual relationship with Mr. Clash was an adult consensual relationship.'”

The settlement document goes on to say if Stephens is asked by anyone about his relationship with Clash, he must only repeat the statement [above] in the settlement that recants his story.

We’ve learned although Stephens signed the document, he continues to insist Clash had sex with him when he was a minor and was pressured into signing the settlement.

One source privy to the negotiations told TMZ that Stephens was crying during final negotiations and repeatedly insisted he didn’t want to sign.

By the way, Clash’s lawyer was contacted for a response, but he had no comment.