Newspaper reports said that Sheeran, 25, went to hospital to have stitches on his cheek after Beatrice, 28, accidentally swung the ceremonial blade over her shoulder, not realising that the Thinking Out Loud singer was behind her.
The incident is reported to have happened at a party at the Royal Lodge in Windsor, after You’re Beautiful singer Blunt, 42, joked that he would love to be made a Sir.
The newspaper said that while Prince Andrew was away on business, Beatrice’s mother Sarah Ferguson was at the do.
A source was quoted as saying that there were around 20 guests at the party.
“Apparently, James Blunt joked that he would love a knighthood,” the source said.
“Beatrice jokingly said she could arrange it and fetched a ceremonial sword… James played along with the prank and got down on one knee as he would if he were at Buckingham Palace being honoured by the Queen.
“Beatrice, who was in great form, held the sword above him and said, ‘Arise Sir James’… but she must have misjudged the weight or something and, instead of lightly tapping him on the shoulder, she swung it back, not knowing Ed was standing right behind her.
“The blade cut into his face and it was just a few inches from his right eye.”
Sheeran, who is taking a break from the music industry, apparently returned to the party – which he is said to have attended with his girlfriend, Cherry Seaborn – after leaving hospital.
The source said: “Afterwards Ed went back to the house and carried on the party as Cherry was there and he wanted to show he was OK to Beatrice.
“Obviously the princess was upset and everyone was talking about it, but she and Ed spoke about it and everything was fine. She did nothing wrong except mess around at a party.”
A Buckingham Palace spokeswoman said that there was no comment.
A spokeswoman for Blunt declined to comment.