Miss Phillips apparently accepted the explanation and the pair have agreed to put the incident behind them.
A friend said: 'She took it remarkably well, considering.'
She enjoyed a year-long relationship with Tindall in 2002, shortly before he met his future wife.
When they split they remained close friends.
Miss Palmer has met Miss Phillips on dozens of occasions and even attended the couple's wedding in July, alongside the Queen.
Three weeks ago CCTV footage emerged of Tindall nuzzling, kissing and hugging a woman during a 'wild' night out with the England rugby team in Queenstown, New Zealand at the start of the World Cup.
Miss Phillips was initially said to be 'dismissive' of the incident, while her agent insisted the girl was just an old university friend of Tindall, 32.
But it now appears she was not aware the pair had been romantically involved.
After flying to New Zealand a week after the scandal broke, she called Miss Palmer, who had fled home to Sydney.
A close friend told the Daily Mail: 'You can see why they didn't mention [their relationship] to her before as there was no need to.
'They were close friends and went back to being close friends. But you can also see why Zara was upset.
'She rang Jess and they had "clear the air" talks. Jess told her nothing happened, nothing untoward and they were just mates mucking around.
'Zara took it very well, they're still friends and I think just wants to move on.'
Miss Palmer's former school friend Vanessa Rooth added: 'She's upset as this has been blown out of all proportion.'
Tindall's spokesman has said the star does not want to comment further.
- Daily Mail
