But sources close to the singers told the Sun the Princess had thrown a dinner party at Royal Lodge, the York family's residence near Windsor Castle, where Sheeran, 25, and Blunt were among 20 guests.
Blunt, 42, a former Army officer, joked that he would like to become Sir James Blunt, and the Princess enthusiastically obliged by fetching a ceremonial sword and proceeding to "dub" him as he knelt.
As she said "Arise Sir James", she reportedly swung the blade over her shoulder, unaware Sheeran was standing behind her.
Sheeran, at the party with his girlfriend, Cherry Seaborn, received such a deep gash he had to go straight to a local hospital accident and emergency unit to have it treated.
Beatrice, 28, was said to be "inconsolable", though Sheeran felt well enough to return to the party later.
The Duke of York was in Mexico on a trade mission, but his ex-wife, the Duchess of York, was at the party.
Dickie Arbiter, the Queen's former press secretary, said: "How stupid can you get? I hate to say it, but it's a case of like mother like daughter.
"It beggars belief."