Diana told Michael about her marriage split, "It's been pretty grim, but we're near the end of it."
She then dissed the royal family, remarking to the "Careless Whisper" singer, "Not a very loving, compassionate family, this one I'm leaving."
A tape of the previously secret call has surfaced as the media marks the 20th anniversary of Di's tragic car crash death on Aug. 31, 1997 at age 36.
Michael, like Diana, died young; he was just 53 when he passed away on Dec. 25 of last year.
Michael called Diana to wish her a happy birthday about a year before her death and she opened up about her divorce, according to The Sun.
The troubled Princess told Michael about her divorce legal terms with Charles, "I'm going to get three quarters of what I want and the quarter he can't have, so there you go."
Michael replied, "I'd love to see you."
But Diana said, "George, can I wait until this has all quietened down? Just lawyers. You know what they're like."
She added, "It's OK, it's all very grown-up."
Michael allegedly gave a tape of the call to his childhood friend Andros Georgiou, 55, who was in the house with the singer during his chat with Diana, The Sun reported. Georgiou claimed Michael told him the explosive tape could help him in retirement!
As well as complaining about Charles, Diana laughed about their mutual buddy, Elton John, comparing the flamboyant star's shoe collection to that of former Philippines First Lady Imelda Marcos.
"Imelda Marcos eat your heart out," Diana laughed.
Also, when gay Michael told Diana he was "in love" during their call, she sadly said, "Oh lucky you, lucky you."
The call was apparently recorded by Michael's answering machine at his home in North London.
As Radar has reported, oodles of fresh revelations have come out about Princess Diana to mark her sad death anniversary this summer.
Also, many have speculated what the beautiful People's Princess' life would be like today had she lived.
We pay for juicy info! Do you have a story for RadarOnline.com? Email us at firstname.lastname@example.org, or call us at (866) ON-RADAR (667-2327) any time, day or night.