They hugged, kissed and prayed together during the 40-minute visit and Mother Teresa blessed the Princess.
Diana, who was in the United States on a Red Cross fundraising mission for landmine victims, flew to see Mother Teresa after a meeting at The White House with Hillary Clinton.
It is understood that she decided not to wait until next week - when she visits New York again - to see Mother Teresa, such is the gravity of the Nobel Peace Prize winner's condition.
Officially, Mother Teresa (whose home is normally Calcutta) is in the Bronx to offer spiritual assistance to the large numbers of poor and dejected in the borough. However, the world's most revered nun is seriously ill and is believed to be resting at a clinic run by her order, the Missionaries of Charity.
Diana is scheduled to be in New York next Monday and Tuesday for a reception before the charity sale of 79 of her dresses.
It is thought Diana and the 86-year-old nun talked about 12-year-old Prince Harry and Prince William, whose 15th birthday is on Saturday, and about charity issues, particularly Third World poverty.
The Princess's friendship with Mother Teresa dates from February 1992 when Diana flew to Rome to meet her after a rendezvous in Calcutta was cancelled because of the missionary's ill-health.
She flew back to Britain last night on a scheduled British Airways service.