Lou Holtz does NOT want his beloved Notre Dame to drop its "Fighting Irish" nickname ... claiming it stems from a group of students who battled the KKK back in the day.

One tiny little problem -- it's not exactly true, Lou!

Here's the deal ... the former ND football coach was on Fox News this week and was asked about a recent "Fansided" article which questions if the school should move on from the whole "Fighting Irish" thing -- which it calls "a stereotype of the violent Irish."

83-year-old Holtz was OUTRAGED by the mere suggestion -- and told this tale explaining the origin of the Fighting Irish name.