The 29-year-old 'Teenage Dream' hitmaker, who attended the Jeremy Scott-Adidas party with Diplo, 35, last Saturday was seen getting flirty with him at the bash, reported E!Online.
The duo were allegedly spotted later going backstage during the annual three-day outdoor concert.
"Katy and Diplo hooked up at Coachella. They were together behind the main stage, where she had a tour bus or trailer, and a group of her friends were hanging out," said a source.
However, other sources insist that Perry and Diplo looked like good friends just having a great time while dancing and laughing in the VIP area.