Following a flurry of scare stories, some schools have warned parents about the "momo challenge" - but fact-checkers say it is a hoax.
The original tale said a character with bulging eyes would "hack" into WhatsApp and set children dangerous "challenges" such as harming themselves.
Charities say there have been no reports of anybody being "hacked" or harming themselves as a result.
But the image is now being shared on social media to frighten children.
It has been found edited into unofficial copies of children's cartoons such as Peppa Pig on YouTube.
"News coverage of the momo challenge is prompting schools or the police to warn about the supposed risks posed by the momo challenge, which has in turn produced more news stories warning about the challenge," said the Guardian media editor Jim Waterson.
What is 'momo'?
In February, versions of the momo story went viral on social media. They attracted hundreds of thousands of shares and resulted in news stories reporting the tale.
According to the story, children are contacted on WhatsApp by an account claiming to be momo. Some versions of the tale suggested "hackers" made the image appear on the phone unexpectedly.
Children are supposedly encouraged to save the character as a contact and are then asked to carry out challenges, as well as being told not to tell other members of their family.
The UK Safer Internet Centre told the Guardian that it was "fake news".
However, unofficial copies of cartoons such as Peppa Pig have been uploaded to YouTube with footage of "momo" edited in. Children watching unofficial uploads may therefore be exposed to the distressing images.
Several articles claimed the momo challenge had been "linked" to the deaths of 130 teenagers in Russia. The reports have not been corroborated by the relevant authorities.
On Wednesday, police in Northern Ireland sought to reassure parents about the doll figure with bulging eyes.
The image of momo is actually a photo of a sculpture by Japanese special-effects company Link Factory. According to pop-culture website Know Your Meme, it first gained attention in 2016.
Fact-checking website Snopes suggested the story was "far more hype or hoax than reality", but warned the images could still cause distress to children.
"The subject has generated rumours that in themselves can be cause for concern among children," wrote David Mikkelson on the site.
Police in the UK have not reported any instances of children harming themselves due to the momo meme.
The charity Samaritans said it was "not aware of any verified evidence in this country or beyond" linking the momo meme to self-harm.
The NSPCC told the Guardian it had received more calls from newspapers than from concerned parents.
What should parents do?
Police have suggested that rather than focusing on the specific momo meme, parents could use the opportunity to educate children about internet safety, as well as having an open conversation about what children are accessing.
"This is merely a current, attention-grabbing example of the minefield that is online communication for kids," wrote the Police Service of Northern Ireland, in a Facebook post.
Broadcaster Andy Robertson, who creates videos online as Geek Dad, said in a podcast that parents should not "share warnings that perpetuate and mythologise the story".
"A better focus is good positive advice for children, setting up technology appropriately and taking an interest in their online interactions," he said.
To avoid causing unnecessary alarm, parents should also be careful about sharing news articles with other adults that perpetuate the myth.