The former Tory wrongly linked to a child sex abuse scandal because of a botched Newsnight investigation is poised to reach a settlement with the BBC.
Lord McAlpine's lawyers are in talks with the corporation and have indicated they could agree terms as early as today.
The peer's solicitor has also urged anyone who named him on Twitter to come forward so they, too, can reach a settlement.
"We know who you are," he warned, adding specialist firms had recorded each offending post and the authors would be tracked down if necessary.
Lord McAlpine took legal action against the BBC after a Newsnight show led to him being mistakenly implicated in a paedophile ring that targeted a Welsh care home.
Although the show did not name the peer and only referred to a senior Conservative from the Thatcher era, it quickly led to him being identified online.
The Newsnight show led to George Entwistle (L) quitting as director-general The fallout fuelled an existing crisis at the corporation sparked by the Jimmy Savile abuse allegations and led to the resignation of director-general George Entwistle.
Media watchdog Ofcom has now launched an investigation into both Newsnight and ITV's This Morning, which came under fire for ambushing David Cameron with a list of alleged paedophiles.
Indications of an early settlement with the BBC came as Lord McAlpine spoke directly about the affair for the first time, and said it had left him devastated.
He pointed out that the whole situation could have been avoided if BBC investigators had called him before airing the claims.
"They could have saved themselves a lot of agonising, and money actually, if they had just made that telephone call," he told BBC Radio 4's The World At One.
"They should have called me and I would have told them exactly what they learned later on - that it was complete rubbish and that I had only ever been to Wrexham once in my life."
He added: "It gets into your bones, it makes you angry, and that's extremely bad for you to be angry, and it gets into your soul and you just think there is something wrong with the world."
The BBC was already in turmoil because of the Jimmy Savile scandal The peer admitted he felt the damage to his reputation was beyond repair because the cloud of suspicion would never completely disappear.
"No it can't be repaired. It can be repaired to a point, but there is a British proverb which is insidious and awful where people say 'there's no smoke without a fire', you know, 'he appears to be innocent, but...',he said.
"It's very difficult and so this is the legacy that sadly the BBC have left me with."
Paedophiles are "quite rightly figures of public hatred", he said, and added: "Suddenly to find yourself a figure of public hatred, unjustifiably, is terrifying."
The peer's solicitor Andrew Reid indicated he is seeking a smaller payout from the BBC because of the inevitable impact on the British public.
"Lord McAlpine is more than aware that the ultimate people who will paying for any monies that he may receive are in fact the licence payers, the people who really own the BBC," he said.
"He is very much aware of this and hence any agreement that is reached is tempered in the light of that."
He also urged those who had named the peer on Twitter to apologise, saying: "We know exactly the extent of what you've done.
"It's easier to come forward and see us and apologise and arrange to settle with us because, in the long run, this is the cheapest and best way to bring this matter to an end."
Sally Bercow, wife of House of Commons speaker John Bercow, is among those who alluded to Lord McAlpine on Twitter. She has since apologised.
An official report into the Newsnight programme, published this week, concluded staff had failed to complete "basic journalistic checks" ahead of the show on November 2.
Steve Meesham, who claimed that a senior political figure of the time had abused him, was not shown a picture of the person he pinpointed and Lord McAlpine was given no right of reply.
There was also confusion about the chain of command and who had ultimate responsibility for signing off the show because editors had stepped aside in the wake of the Savile scandal.
After rampant speculation prompted the peer to issue an extraordinary statement protesting his innocence, Mr Messham was shown a picture and confirmed he had made a mistake.
Newsnight made a full, on air apology for the broadcast and hours later Mr Entwistle resigned. BBC director of news Helen Boaden and her deputy Stephen Mitchell have also now stepped aside while internal inquiries take their course.
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