Oddly dismissed old wife’s tale (3)
I believe the answer is:
lie
'tale' is the definition.
(tale can mean a lie or invention)
'oddly dismissed old wife's' is the wordplay.
'oddly dismissed' indicates alternate letters (odd-numbered letters get removed).
'wife's' becomes 'ie' (I am not sure about this - if you are sure you should give a lot more credence to this answer).
The alternate letters of 'old' are 'l'.
'l'+'ie'='LIE'
(Other definitions for lie that I've seen before include "Piece of fiction" , "buried" , "create fiction" , "Assume a horizontal position" , "Prevaricate or recline" .)