How do you politely tell someone to shut up?

Just look him straight in the eye and say “really?”
Let him know nonverbally that you know he’s going way over the top.

That you used, “take him down a peg or two…” makes me wonder if he’s being believed by some of your other co workers and this is what more upsets you? Also your tag of social networking: are you implying this person works here in fluther and fluther is your place of work?
Those people are everywhere, like the Compassionate_Heretic suggests, look him in the eye (or type out) “really” or, “right on!” or, “excellent!”

Suggest that he start writing, because he’s a gifted story teller.

When this happens to me I usually respond with something like “No kidding! Wow. How weird. The same exact thing happened to me! What are the chances???”

Eventually this tall tale tellers start avoiding you and tell their tales else where.

Whoa…you edited the question now my answer seems weird…so be it. I like weird answers I think

To the new question:

Pardon me, but you your mouth seems to be open and crap is coming out. Would you mind?

Wow, you just changed your entire question to where it makes no sense now.

That I did vzz. That I did. I Feel I sounded too crass.

@LuvBubble: But the question was a good one, crass or not.

For starters, you don’t say “shut up…”

I’d recommend sternly saying “HEY – now is not the time…”

Not impolite, but very direct. Strikingly effective…

Stick your index fingers in your ears & start “la la la”-ing.

@LuvBubble Ooohhhhhhhhh go back to your original avatar!

normally, I don’t get involved, but @LuvBubble, what exactly is your picture?

KING DIAMOND!

im going to update this question with a non-crass question.

Shut up….pretty please.

What do you mean? Is the person just talking excessively about nothing of importance? Or is the person saying things you find offensive? I need more info.. :)

‘Where’s the off switch?”

Arm around the person’s shoulders, smile affectionately, and say, “Time to shut up.”