Posted by Yumna
Volume 3, Book 49, Number 857 :
Narrated by Um Kulthum bint Uqba (radiallaahu `anhaa)
That she heard Allah’s Apostle (sallallaahu `alayhi wasallam) saying, “He who makes peace between the people by inventing good information or saying good things, is not a liar.”
The basic principle concerning telling lies is that it is one of the signs of the hypocrites, because the Prophet (peace and blessings of Allaah be upon him) said: “The signs of the hypocrite are three: when he speaks, he lies, when he makes a promise he breaks it, and when he is entrusted with something he breaks that trust.” Narrated by al-Bukhaari, 32; Muslim, 89.
But there are some instances in which Islam permits lying, if that serves a greater purpose or wards off a greater harm:
These cases include the following:
1- When a person is intermediating in order to bring about reconciliation between two disputing parties.
2- When a man speaks to his wife, or a wife to her husband, concerning matters that will increase the love between them.
It was narrated that Asma’ bint Yazeed said: The Messenger of Allaah (peace and blessings of Allaah be upon him) said: “Lies are not appropriate except in three cases: when a man speaks to his wife to please her, telling lies at times of war, and lying in order to bring about reconciliation between people.”
Shaykh al-Albaani said: it is hasan.
Taken from IslamQA
Read about white lies here.