A close friend of the late Queen has resigned from her royal role after allegedly asking a black visitor at Buckingham Palace: "What part of Africa are you from?"
In a Twitter post, Ngozi Fulani, who runs a black women's domestic abuse charity, claims she was questioned about her ethnicity by Lady Susan Hussey.
The 83-year-old was one of the late monarch's most trusted friends and is Prince William's godmother.
An investigation has been launched and the palace slammed the "unacceptable and deeply regrettable comments".
A royal source confirmed Hussey has departed from her honorary role in the household.
Ngozi, a charity boss from London, claims Hussey asked her: "Where do you come from?"
In a conversation that followed, the member of the household allegedly continued to ask "what nationality are you?", "where do your people come from?" and "what part of Africa are you from?"
She also allegedly said: "I can see I am going to have a challenge getting you to say where you're from. When did you first come here?"
Eventually, Ngozi says she replied: "I am a British national, my parents came here in the 1950s," before Hussey responded with: "Oh, I knew we'd get there in the end, you're Caribbean."
Ngozi says she then corrected the aristocrat by responding with: "No, I am of African heritage, Caribbean descent and British nationality."
Mandu Reid, leader of the Women's Equality Party, who was next to Ms Fulani and witnessed the exchange, said they were treated almost like "trespassers".
Ms Reid said: "We really felt 'oh, OK, we're being treated almost like trespassers in this place'.
"We're not being treated as if we belong, we're not being embraced as if we are British."
She described the exchange as "grim" and like an "interrogation", adding "She was really persistent.
"She didn't take Ngozi's answers at face value."
She added: "I have no idea what she was seeking but the effects of that exchange was that we felt unwelcome.
"We all felt people that people like us are not really on a par with other people in the room. It made us want to stay on the periphery of the event.
"It took us all by surprise there is no question. I still can't believe I witnessed this first hand to one of my friends.
"Lady Susan just exited the conversation when she was done and went to speak to other people, leaving us all utterly shocked.
"Ngozi wanted to go home, she felt in that moment that she was no welcome and said 'it would be better for me to just head out and leave now', but we explained what we had just witnessed to the person who had accompanied us to the palace and she agreed it totally inappropriate and unacceptable and it was racist, but there wasn't a way in the moment to get any redress or recompense or complain.
"We felt totally exposed and isolated and out of place in those moments.
"It is not right to just brush this under the carpet and shrug it off and it needed to be addressed."
Hussey was always referred to as the “head girl” as the most senior and trusted of seven ladies in waiting who dedicated decades of their lives in service to the Queen.
She was one of only three still kept on by King Charles at the Palace.
Ms Fulani was at the palace for a meeting attended by the Queen Consort and other notable royals for an event speaking on violence against women.
It was held as part of the UN’s “16 days of activism against gender-based violence”, included around 300 guests - campaigners, politicians and celebrity ambassadors - to draw attention to the ongoing crisis.
A palace spokesman said: "We take this incident extremely seriously and have investigated immediately to establish the full details.
"In this instance, unacceptable and deeply regrettable comments have been made. We have reached out to Ngozi Fulani on this matter, and are inviting her to discuss all elements of her experience in person if she wishes.
"In the meantime, the individual concerned would like to express her profound apologies for the hurt caused and has stepped aside from her honorary role with immediate effect.
"All members of the Household are being reminded of the diversity and inclusivity policies which they are required to uphold at all times."
It is not the first time Lady Susan has made comments, having allegedly warned that Prince Harry and Meghan Markle 's marriage would "all end in tears".
Hussey is said to have made the comment a few months before the couple wed at a lunch with a group of theatre executives.
The comments from the aid were revealed in a new book by investigative writer Tom Bower.
Revenge: Meghan, Harry And The War Between The Windsors was published in July.
Bower writes: "While discussing the possibility that Meghan might become linked with the National Theatre after the wedding, Hussey became unexpectedly serious about the couple’s future.
"'That will all end in tears,' she is alleged to have warned. 'Mark my words.'"
The 83-year-old is said to have been a member of the team asked to help the American-born actress adjust to life within the Royal Family.
The book claims that Hussey is said to have visited Meghan at Nottingham Cottage - the property in the grounds of Kensington Palace where she lived with Harry - to offer advice and help.
In response, the duchess is claimed to have been "insistent" that she would not let Buckingham Palace shape her or dictate her activities and thoughts.
Prince Harry and Meghan celebrated their fourth wedding anniversary in May.
Prince William has also commented on the claims made by Ngozi.
His spokesperson said: "I was really disappointed to hear about the guests' experience at Buckingham Palace last night.
"Obviously, I wasn’t there, but racism has no place in our society.
"The comments were unacceptable, and it is right that the individual has stepped aside with immediate effect."