Think about a time you have come up against a challenge that you successfully resolved. Don't dredge up a catastrophe that resulted in personal or professional failure – stick to a story with a happy ending. And don't make it about a personal clash with a co-worker, but rather a professional challenge that places you in a positive light.
The interviewer is also trying to determine what you define as 'difficult' so try to choose an example that was challenging but not impossible to resolve.
Good examples are:
The interviewer wants to see that you have resilience, problem-solving skills, initiative and the ability to work around less-than desirable situations. Clearly explain how you identified the problem and reached a solution both professionally and quickly, and what the final positive outcome was.
Keep in mind they are interested in determining how your actions and decisions will affect the business so always describe a conclusion that shows you acting in a positive way for the company.