The 42-year-old - who has three daughters with Argentine wife Luciana - became the subject of speculation with best friend Ben, following their rise to fame with Oscar-winning drama Good Will Hunting, but despite being straight, never spoke out about the rumours until now.
"I never denied those rumours because I was offended and didn't want to offend my friends who were gay, as if being gay were some kind of f*****g disease. It put me in a weird position in that sense," he told Playboy magazine.
"These two men were deeply in love and in a real relationship - a marriage - long before there was gay marriage. That's not an insignificant thing. If Liberace were alive today, everybody would love his music and nobody would care what he did in his private life. Like with Elton John," he said.
The Oscar-winning actor insisted that the film will be respectful.
"We both have a lot of gay friends and we were not going to screw this up or bulls*** it," he explained.
Matt also revealed how Gus Van Sant approached him about starring in Brokeback Mountain alongside Joaquin Phoenix, but he decided against it because he had just finished The Talented Mr Ripley and All The Pretty Horses.
"(I told) Gus, 'let's do it in a couple of years. I just did a gay movie and a cowboy movie. I can't do a gay cowboy movie now'," he admitted.