It is easier said than done. Unfortunately, there is not a direct AND easy way to do it. You may hurt her feelings, but she will appreciate your honesty in the long run. Just tell her the truth without wavering - I don't like you that way.
Sit her down and explain that you are sorry for the confusion but she misunderstood your intentions. She might be upset but she'll get over it. You better do it fast, if she breaks up her current relationship before you talk to her, she will be even more upset.