Best way to handle an overbearing co-worker?

You're not going to like my response. You must remember that she is your supervisor. She may be wrong, but perception is reality. What that means is: what she thinks, is fact. Just like your perception of her is reality.

Your best bet is to work hard and work your way up. I know it sucks right now, but you can actually use this as learning tool. You now know what kind of supervisor you don't want to be. Whether you realize it or not, she is teaching you how to be a better supervisor when you are promoted to that level.

I know it's hard, but just keep your head up and try to stay out of her way. You may also want to keep documentation. Each time she wrongly yells at you about a conversation with a customer, document it. Note the day, time, what you said on the phone that she overheard and her conversation with you after you hung up the phone. Also write down your response to her. You can bring these things up during your performance review. You'll either see that maybe your tone is abrasive or she'll see that she's wrong.

Ask around the office discreetly, and see if anyone else is having difficulties with this woman. If they are, you could go out for a drink or meal together and plan a meeting with her.

Be polite, don't stoop to her level, and tell her that her manner is rather unfortunate and is affecting staff morale. Ask her if she is having problems that perhaps you could help with? Believe me, I have had experience of this, and the best way to confront someone is to confound them with concern! You might find that she is rather insecure and not a happy person.

Then give it a few weeks and see what happens. If she does start to interfere just calmly say that you know what your job is and you could do it better if someone is not looking over your shoulder and that if she has a problem, you would rather she talks to you when you are not in the middle of dealing with a client. Calmly (you might have to breathe deeply a few times) tell her that you were brought up to believe that it was rude to interrupt a conversation. You will have to lead by example and hold your tongue if she start mouthing off and when she has finished ask her if she is indeed finished, and might you now be given the courtesy of saying your piece. Keep it calm. Do not get aggressive or weepy. That will give her more fuel.

If none of the above work, speak to your immediate boss above her.

Nobody should have to put up with this kind of intimidation. Try and get some back up when you speak to her boss.

Sit her down and put it plain and simple or look for a new job.