A woman wearing a headscarf who claimed that she was slashed and called a "terrorist" by an unknown assailant yesterday afternoon later admitted she made up the story. She is now at Bellevue for psychiatric observation.

The 20-year-old woman, who is described as being of Middle Eastern descent, attends Make-up Designory School at 65 Broadway in lower Manhattan. Police sources told the Daily News that the woman claimed "she was walking toward Trinity Church at 4:10 p.m. Her attacker, she said, came up behind her by Wall St., grabbed her arm, and slashed a roughly 2-inch gash into her cheek."

Assistant Chief William Aubry said at the time, "She reported that when he slashed her, he made a statement to the effect that she was a terrorist, and he continued to flee northbound on Broadway."

The NY Post's police sources say cops canvassed the area and reviewed security camera footage but were unable to find any evidence of the suspect. After further questioning at the hospital, the woman reportedly told cops she had cut herself.

The incident comes as the NYPD is trying to stem an increase in slashings.