The new track titled 'Princess Die' premiered by Gaga, 26, in Melbourne, Australia outraged royal fans with her risque lyrics, reported Sun Online.
In the song, Gaga imagines herself as the late royal, singing, "Princess Die, I wanna see you cry, and wish that I would go, in my rich boyfriend's limo. Right after he proposed, with a 16-carat stone wrapped in rose gold, with the paparazzi all swarming around."
The Princess of Wales was killed in a car crash in 1997 as paparazzi pursued her and her lover Dodi Fayed through a tunnel in Paris. It is claimed Dodi had given Diana an engagement ring before the crash.
Gaga also refers to Diana's fashion style, singing, "In my Louis Vuitton white button-down... So bob head your head for another dead blonde."
But it is not the only part of the song that is causing controversy. Suicide charities in Australia, where she sang the number on Wednesday night, have slammed the line: "I wish that I could cope but I took pills and left a note."
Gaga began working on the song late last year. She had admitted to being inspired by the Princess.
"Diana was the most iconic martyr of fame. She died because of it," she had said.