Soviet spies have admitted using bugging devices on the Royal Family and former British Prime Minister Harold Wilson, the Daily Mail reported on Sunday.
Secret agents from the KGB targeted Princess Margaret in the 1960s, attaching listening aids to her lighter, cigarette case, ashtrays and telephones.
They homed in on the Princess during a trip to Copenhagen, Denmark in 1964.
Until now, Russia has always denied the covert operation, which took place in a hotel, but has now admitted compiling a dossier on the Princess's relationships.
Spies passed photos, tape recordings and “most interesting, even scandalous” gossip involving senior royal figures, according to the Mail.
But spies failed in a sting operation on then future leader Harold Wilson, setting up a 'honey trap' for him in a Moscow hotel.
Female agents posing as prostitutes patrolled the hotel overlooking the Kremlin, with a camera planted in a chandelier in his bedroom.
But when the film was developed, Wilson's face was disguised.
Colonel Vadim Goncharov, who has since died, was the KGB chief in charge of the snooping operations, and he was ordered by bosses to go on television to deny the claims, fearing they would cast a shadow over the Queen's first and only visit to Russia in 1994.
But last week Russia newspaper Komsomolskaya Pravda boasted that among Goncharov's successes was “the bugging of drunken parties of the British Princess Margaret”.
A book to be published next year, entitled, “The Kremlin v The Windsors”, by the paper's Gennady Sokolov will provide further details of the operation, the Mail reported quoting the Russia newspaper.
Master spy Goncharov, who staged stings in more than 100 countries and survived assassination attempts, said of the Princess Margaret operation: “As I recall there were no lovers, though there was a visitor. On this occasion our interest was in getting confidential information which would open certain doors for us in Britain.”
On the failed attempt at trapping Wilson, he said: “It was as if he was playing games with us.”