In the early 1990s, the marriage of Diana and Charles fell apart, an event at first suppressed, then sensationalised, by the world media. Both the Prince and Princess of Wales allegedly spoke to the press through friends, each blaming the other for the marriage's demise. Charles resumed his old, pre-marital affair with Camilla Parker-Bowles. Diana claimed Charles resumed his affair with Camilla as early as 1984, just three years after their marriage, while Charles later admitted to resuming it around 1986. Asked what part Camilla had played in the break-up of her marriage, Diana commented during the BBC programme Panorama, "Well there were three of us in this marriage, so it was a bit crowded."
During the Panorama television interview, shown on 20 November 1995, Diana confirmed she had an affair with her riding instructor, James Hewitt. Charles had confirmed his own affair over a year earlier in a televised interview with Jonathan Dimbleby. The Prince and Princess of Wales were separated on 9 December 1992. Although her affair with Hewitt was the longest lived of her affairs, Diana also had relationships with other men after her affair with Hewitt ended when he was posted to Germany. According to some sources, but which Diana vehemently denied, she had an affair that preceded her affair with Hewitt, with her bodyguard, but after leaving the Royal Protection squad he was killed in a motorcycle accident.
While she blamed Camilla Parker-Bowles for her marital troubles, at some point Diana began to believe Charles had other affairs. In October 1993 Diana wrote to a friend that she believed her husband was now in love with Tiggy Legge-Bourke and wanted to marry her. Legge-Bourke had been hired by Prince Charles as a young companion for his sons while they were in his care, and Diana was extremely resentful of Legge-Bourke and her relationship with the young princes.
On 3 December 1993, Diana announced her withdrawal from public life.
In December 2007, witnesses at the inquest were questioned about a letter to Paul Burrell which Diana had written by hand in October 1993, of which only redacted versions had previously been public. In this letter, Diana said -
“This particular phase in my life is the most dangerous - my husband is planning "an accident" in my car, brake failure and serious head injury in order to make the path clear for him to marry Tiggy. Camilla is nothing but a decoy, so we are all being used by the man in every sense of the word.”
In December 1995, the Queen asked Charles and Diana for "an early divorce," as a direct result of Diana's Panorama interview. This followed shortly after Diana's accusation that Tiggy Legge-Bourke had aborted Charles's child, after which Legge-Bourke instructed Peter Carter-Ruck to demand an apology. Two days before this story broke, Diana's secretary Patrick Jephson resigned, later writing Diana had "exulted in accusing Legge-Bourke of having had an abortion".
On 20 December 1995, Buckingham Palace publicly announced the Queen had sent letters to Charles and Diana advising them to divorce. The Queen's move was backed by the Prime Minister and by senior Privy Councillors, and, according to the BBC, was decided after two weeks of talks. Prince Charles immediately agreed with the suggestion. In February Diana announced her agreement after negotiations with Prince Charles and representatives of Queen, irritating Buckingham Palace by issuing her own announcement of a divorce agreement and its terms.
The divorce was finalised on 28 August 1996.
Diana received a lump sum settlement of around £17 million along with a clause standard in royal divorces preventing her from discussing the details. Diana and her advisors shrewdly negotiated with Charles and his representatives, with Charles reportedly having to liquidate all of his personal holdings, as well as borrowing from the Queen, to meet her financial demands. The Royal Family would have preferred an alimony settlement, which would have provided some degree of control over the erstwhile Princess of Wales.
Days before the decree absolute of divorce, Letters Patent were issued with general rules to regulate royal titles after divorce. In accordance, as she was no longer married to the Prince of Wales, Diana lost the style Her Royal Highness and instead was styled Diana, Princess of Wales, the standard styling for divorced wives of nobility, where divorce had been common for decades. Buckingham Palace issued a press release on the day of the decree absolute of divorce was issued, announcing Diana's change of title.
Buckingham Palace stated Diana was still a member of the Royal Family, as she was the mother of the second- and third-in-line to the throne, which was confirmed by the Deputy Coroner of the Queen’s Household, Baroness Butler-Sloss, after a pre-hearing on 8 January 2007: "I am satisfied that at her death, Diana, Princess of Wales continued to be considered as a member of the Royal Household."This appears to have been confirmed in the High Court judicial review matter of Al Fayed & Ors v Butler-Sloss. In that case, three High Court judges accepted submissions that the "very name ‘Coroner to the Queen’s Household’ gave the appearance of partiality in the context of inquests into the deaths of two people, one of whom was a member of the Family and the other was not."