Her complaint has triggered an investigation at Fox by the law firm Paul, Weiss, Rifkind, Wharton & Garrison, the same firm that uncovered widespread harassment allegations against Fox News chairman Roger Ailes last summer, leading to his ouster.
A similar fate could await O'Reilly; a negative finding by the law firm could force the hands of Fox News Chairman Rupert Murdoch and his sons, James and Lachlan, who run Fox's parent company.
In view of the stakes involved, O'Reilly's camp is vigorously contesting Walsh's allegation, in an unusually public way.
His advocates have challenged details of her story, as well as some of the media reporting about it.
O'Reilly himself has remained silent; he started an abrupt two-week vacation last week amid a steady exodus of advertisers from his program.
The originator of the "No-Spin Zone" has instead left his public defense to a well-known spin doctor, Mark Fabiani, a former spokesman for president Bill Clinton.
According to Walsh, 54, O'Reilly dropped her as a regular guest on his show and reneged on a promise to help her secure a paying position as a Fox News commentator after she turned down his invitation to visit his hotel suite during a dinner meeting in Los Angeles in February 2013.
However, O'Reilly's defenders say O'Reilly never made a job offer and did not retaliate against her.
Instead, they say, O'Reilly was continuously helpful to Walsh after their meeting at the Hotel Bel-Air.
O'Reilly, for example, continued to invite her on his program for four months after the hotel encounter.
During several of her appearances, which focused on relationships and behavioural issues, O'Reilly plugged Walsh's book, "The 30-Day Love Detox," a valuable bit of promotion, given O'Reilly's large audience.
But Lisa Bloom, Walsh's attorney, said Walsh continued to go on O'Reilly's program because she hoped to become a paid contributor to Fox News.
Bloom called the Fox News host "a mean-spirited bully" who put Walsh in a "no-win situation" when he allegedly asked her to go to his hotel room.
O'Reilly, she said, has "a history of attacking women who complain about his sexual harassment."
As for O'Reilly's help in promoting Walsh's book, Bloom said, "Life is not black or white. Wendy does not contend that every action he took was retaliation. . . . She [was] trying to stay very friendly with him to salvage that chance for the job. She wanted him to see her as nonthreatening. She wanted him to be professional and get over it."
Walsh was a guest on "The Factor" 13 times after her meeting with O'Reilly in Los Angeles, appearing almost weekly from late February until mid-June of that year.
He mentioned her book four times after it was published in mid-April and repeatedly showed its cover on the air.
O'Reilly also was apparently instrumental in securing for Walsh an appearance on the daytime chat program "The View" in mid-April during which she also promoted her book.
That year, Walsh wrote to one of O'Reilly's producers in mid-April, asking him for further promotional help.
"Please, please, pretty please, can we do a segment on my book on the 25th???," she wrote in an email, proposing several potential ideas for discussion.
O'Reilly didn't take up her suggestions, but Walsh did travel from Los Angeles to New York to appear on the Fox News set with him for her regular segment that day.
Another email is from Walsh to O'Reilly's assistant in September 2013, seven months after the hotel meeting.
"Specifically, please convey to 'the boss' [O'Reilly] that I am deeply grateful for his professional kindness," Walsh wrote.
"His media power is immeasurable and his call to ["The View's" executive producer] really launched my book tour on a high note. Can't thank him enough."
Bloom did not dispute the emails' authenticity.
According to both sides, the program's producers told Walsh in mid-June that her regular weekly segments - titled "Are We Crazy?" - would be ending. Walsh was identified as a "human behaviour expert" on the segments, which covered such topics as online dating, helicopter parenting and declining moral values.
There's some dispute about exactly when her appearances would end. Bloom contends that Walsh was told that her segment would be suspended during the summer vacation period and that there was a chance it could return in the fall.
But Bonny Forrest, a psychologist and lawyer who appeared with Walsh each week, said it was clear in June that she and Walsh were finished.
Forrest said Walsh made no mention of the hotel episode or of retaliation by O'Reilly when they spoke about the potential demise of their segments that June.
In an interview, Forrest said Walsh first raised the hotel episode with her in vague terms in September 2013, when it was clear to Walsh that Fox did not intend to bring them back on the air.
Forrest said Walsh told her then that she suspected their cancellation was due to the hotel encounter.
But Walsh didn't mention then that O'Reilly had offered and then rescinded a job, Forrest said.
"I heard the allegation from her in September, and what she related to me was very different from what's in the press now," Forrest said.
Forrest - who has been interviewed by investigators representing Paul Weiss - added: "I take sexual harassment and racial discrimination very seriously. But I also believe in this instance there are some statements made in press that aren't consistent with my experience."
According to Bloom, Walsh told a number of friends about O'Reilly's alleged behaviour since 2013.
She declined to come forward last summer when Paul Weiss was investigating sexual-harassment complaints at Fox News on the assumption that the inquiry was focused on Ailes, not O'Reilly.
Her first formal mention of it to anyone at Fox News came last week, when she and Bloom made a formal complaint to a company hotline set up for harassment complaints.
When a New York Times reporter called Walsh late last year, she was reluctant to go on the record, but ultimately decided to speak up, Bloom said.
"She was scared," she said. "But she knew that we can never change the epidemic of sexual harassment unless we speak out."
O'Reilly has never admitted to sexual harassment. He said he settled the complaints against him to spare his children from negative publicity about himself.
Walsh decided to come forward out of concern for her children, too, Bloom said: "She did it for her daughters."
