How to respond to a tough referee report? We received two referee reports from the editor, who made a major revision decision. One referee has a long list of comments, while on the whole it is positive towards our paper. But the other one gave only half-A4-page comment with strong criticism on the paper as well as some other works in the community, as you can see as follows, which is very tough.

Review report:


  The manuscript considers proposition. The authors carry out their study in the framework of an approximation. Unfortunately, the approach used in the manuscript
  is totally wrong since reviewer's scientific objection. This issue representing a pitfall for many
  researchers in the past (and unfortunately sometimes in the present)
  is thoroughly described in one reference deleted here, which is an article of another author.
  
  Therefore, I recommend to reject the manuscript. I do not see a
  possibility to repair it and to reduce it so that it will fit for
  publication.


After I read the reference provided, I think that the approach used in our work is correct and the results presented are reasonable, because none of which directly contradict with the reference cited by the referee.

My questions are: what is the best practice to respond the editor and how do I refute the criticisms of the referee?

I apologize if my question is too general for this site. Thanks for your help!
The main problem with this as a review is not the brevity or harshness (neither one of which is necessarily inappropriate) but failure to adequately explain/justify their objection to your work.

A good review should give objections/criticisms that stand on their own.  References should be used to support the reviewer's points, not given in lieu of any explanation.

In addition, it seems that it is also not obvious how the reference relates to your work.

Make the focus of your response not this reviewer is wrong but I don't understand this reviewer's point.  Explain why your work is different from that discussed in the reference and why you think the objections don't apply, and thus it is not clear to you why the reviewer objects.  

In addition, you ought to ask the editor what they have in mind by major revisions.  The "major revisions" response sounds like it was halfway between the responses of the two reviewers.  But that doesn't mean it is a coherent synthesis of their positions.  It doesn't seem there are any changes that would satisfy the second reviewer (indeed, they have pre-announced that).  So what does the editor expect you to do with this request?  I would seek clarification on this.  

It may well be that the difficult reviewer will not have their way in the end (the fact that the paper was not rejected by the editor as they requested suggests this).  So you may be able to simply add some more supporting text for your approach, have their inevitable reject decision overridden by the editor, and be fine.