During the current COVID-19 pandemic, misinformation is a major challenge, raising several social and psychological concerns. This article highlights the prevailing misinformation as an outbreak containing hoaxes, myths, and rumours. In comparison to traditional media, online media platforms facilitate misinformation even more widely. To further affirm this ethical concern, the researchers cite relevant studies demonstrating the role of new media in misinformation and its potential consequences. Besides other significant psychosocial impacts, such as xenophobia, psychological distress, LGBT rights violation, gender-based violence, misinformation is undermining healthcare workers’ psychological health and their efforts to mitigate the impact of COVID-19. In view of the adverse consequences of misinformation, this article addresses it as a massive ethical challenge during the current outbreak. Thus, the researchers make relevant suggestions to evaluate misinformation sources and mitigate the psychosocial impacts attributed to misinformation during crises. They include forming mental health teams comprising of psychologists, psychiatrists, and trained paramedical staff; rapid dissemination of authentic and updated COVID-19 situation reports regularly; establishing helpline services; and recognizing a broader range of personal needs. All health authorities should make clear that they are listening and responding to public concerns. Much effort is needed to counteract COVID-19 misinformation.