BBC pays 'substantial' damages to royal nanny over Diana interview
Stay tuned with 24 News HD Android App
Alexandra Pettifer, known at the time as Tiggy Legge-Bourke, was given a public apology for "fabricated" allegations that she had an affair with the princes' father, Prince Charles.
The High Court in London was also told that she was falsely accused of becoming pregnant by him when she was his personal assistant and of having an abortion.
Pettifer's lawyer Louise Prince said the allegations caused "serious personal consequences for all concerned" and her client did not know where they came from.
It has since emerged that he used subterfuge, including fake documents alleging some of her aides were in the pay of the security services.
Pettifer's lawyer said the "totally unfounded" claims "appeared to exploit some prior false speculation in the media" about her and Charles.
"After Diana, Princess of Wales, became aware of the allegations in late 1995, she became upset with the claimant without apparent justification," she added.
Prince said Pettifer "holds the BBC liable for the serious impact the false and malicious allegations have had" which had caused her "25 years of lies, suspicion and upset".
Pettifer said she was one of many people whose life had been "scarred" by the way the programme was made and the BBC's failure to investigate properly afterwards.
"The distress caused to the royal family is a source of great upset to me," she added.
"I know first-hand how much they were affected at the time, and how the programme and the false narrative it created have haunted the family in the years since."
He also apologised to her, Charles, William and Harry "for the way in which Princess Diana was deceived and the subsequent impact on all their lives".