Private conversations were held between King Charles III and Prince Harry after the Queen's funeral last year, where Charles reportedly confirmed Harry's children Archie and Lilibet would have royal titles.
Harry and Meghan Markle's daughter Lilibet was referred to as "Princess" for the first time on March 8, meaning that the Sussexes will use the titles for their children.
It was previously reported that Harry, 38, and Meghan, 41, were "obsessed" with the idea that the King might bar their children from being referred to as "prince" or "princess".
But a royal source told the Mirror that Charles would never have "punished" his grandchildren like that.
The source said: "The appropriate conversations took place ahead of Lilibet's christening."
OK! reached out for comment.
Archie, three, and 21 month old Lilibet adopted their royal titles when the King acceded to the throne, but they have remained as "master" and "miss" on the Buckingham Palace website for the past six months.
Harry and Meghan's youngest Lilibet was described as "Princess Lilibet Diana" when a spokesperson confirmed she was christened in a private ceremony at the Sussexes' home in Montecito, California, on March 3.
"I can confirm that Princess Lilibet Diana was christened on Friday, March 3 by the bishop in the Episcopal Diocese of Los Angeles, the Rev John Taylor," the statement said.
It comes after the reports that Archie and Lilibet were said to be "unlikely" to receive royal titles after King Charles III decided to evict the Sussexes from their UK base of Frogmore Cottage.
The King made the decision following the publication of Harry's memoir Spare, in which he accused his step-mother Queen Consort Camilla of leaking stories to the press.
Royal expert Richard Fitzwilliams told the Express that "Harry and Meghan’s children Archie and Lili are highly unlikely to be granted titles", adding that it will likely mean that the family's visits to the UK will be "few."
Harry and Meghan named their second child Lilibet after welcoming their daughter together on June 4, 2021.
The couple decided to give a touching nod to Queen Elizabeth II with the beautiful name and the Queen was said to be supportive of their decision.
But royal author Tom Quinn claimed Harry would have known that this would be perceived as "disrespectful and instructive" to the Queen.
In his new book, Gilded Youth An Intimate History of Growing Up in the Royal Family, Tom wrote: "Even naming this child sparked a diplomatic scuffle.
"Hating even to think about the admittedly labyrinthine rules of protocol that surrounded the British royal family, Meghan and Harry called her Lilibet, apparently in the belief that it would be a wonderful surprise for her great-grandmother, Queen Elizabeth.
"He surely would have known that appropriating the monarch's beloved childhood nickname would be perceived by many as disrespectful and intrusive in a way that naming their daughter Elizabeth would have not been."
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