Dodi Al Fayed told a jeweller he and Princess Diana were planning to announce their engagement, their inquest has heard.
Alberto Repossi said he was resizing an engagement ring for Diana
Alberto Repossi claimed the couple had chosen a ring from his shop in the summer of 1997, weeks before they died.
He said Mr Al Fayed asked for it to be urgently resized "because at the beginning of September their engagement would be announced".
Mr Repossi also said Mohamed Al Fayed feared Dodi's calls were being bugged.
He said Harrods boss Mr Al Fayed told him that American spies would know about the engagement because they were listening to his son's conversations.
One of Mr Repossi's shops, opposite the Ritz Hotel in Paris, was visited by Mr Al Fayed about six hours before his death.
He, Diana and their driver, Henri Paul, were killed in a car crash in Paris in 1997.
'Very important client'
Mr Repossi was challenged repeatedly by Nicholas Hilliard, counsel to the inquest, about different accounts he had given to detectives and journalists.
At one stage, the jeweller thumped the table in front of him and said loudly in English: "You are very tough."
The jeweller's evidence conflicted with that of former Ritz Hotel assistant president Claude Roulet who appeared before the inquest last week.
Mr Repossi told the High Court inquest in London that staff at his Monte Carlo shop told him the couple had visited on 5 August.
Around the same time, he said he received a phone call from Franco Mora, then manager of the Ritz, who told him a "very important client" would be coming in.
Mr Repossi said that Mr Mora called again shortly afterwards and told him that Princess Diana and Mr Al Fayed had seen a diamond ring in his window, had given him a size and had told him it was needed by the beginning of September.
Mr Repossi said he told Mr Mora that would be difficult because his workshop would be closed for the whole of August.
"But then the same day I received a call from Dodi who told me that he needed this ring for the end of August because at the beginning of September their engagement would be announced," Mr Repossi said.
"I told him that I would do everything necessary."
Before they died, Diana and Mr Al Fayed were staying at the Ritz, owned by Dodi's father Mohamed.
Mr Repossi said he met the couple secretly in a hotel in St Tropez in the south of France to show them the engagement ring.
But, giving evidence by video link on Monday, he said he could not remember which hotel it was.
He also said he had vowed not to tell British police about the meeting because he could not prove it had taken place.
Mr Hilliard read a letter from Mr Repossi to Mr Al Fayed's father which included the statement: "I have never ever claimed that either Dodi or Princess Diana personally told me or any of my staff that they were about to announce their engagement."
Mr Repossi queried whether the letter was genuine, but could not explain the discrepancy when he was told it had been verified by Mohamed Al Fayed's lawyers.
The jury has seen receipts for a ring costing £11,500 bought at Mr Repossi's Paris shop.
Mr Roulet has told the inquest that the first time Mr Al Fayed saw the ring was when it was delivered to the hotel just hours before the crash.
But Mr Repossi insisted that Mr Al Fayed and Diana chose the ring in early August.
Cross-examining him, Richard Horwell QC, representing the Metropolitan Police, said: "I suggest that you have told, over the years... a series of lies about what happened in August 1997."
Mr Repossi replied: "I understand that it's a problem for you that they have chosen an engagement ring but it's not my concern."