"They saw each other recently. There's still very much something between them, but Chelsy won't commit yet because she doesn't want to lead a life in the spotlight. Harry's very sensitive to that."
Prince Harry's last serious relationship with actress and model Cressida Bonas ended last year.
He spent this summer working as a wildlife conservation volunteer on frontline projects in southern Africa and will return to the UK before attending an event to mark the 75th anniversary of the Battle of Britain, which takes place on the same day as his 31st birthday, 15 September.
He will return to Africa to visit Lesotho and South Africa in November and December.
The source suggested it was "no coincidence that Harry decided to spend more time in Africa later this year.
"He has never fallen out of love with Chelsy. She's not like other girls; she's strong, independent and a rule-breaker. She does everything on her own terms."
A timeline of their on-off romance
2004: The pair first meet. Miss Davy, 19, is a pupil at Cheltenham Ladies College near Prince Charles's Highgrove estate. They later go public with their relationship when they are spotted holidaying together in Argentina and Prince William says his younger brother is "madly in love".
April 2006: Miss Davy is rumoured to be "livid" after Harry reportedly visited a lap-dancing club near Slough to celebrate the end of his training at Sandhurst.
September 2007: Miss Davy starts a degree in law at Leeds University.
October 2007: Newspapers report the couple's split after Harry misses Miss Davy's 22nd birthday party to go to the Rugby World Cup final in Paris. But the pair reconcile later that month.
May 2008: The couple attend Peter Phillips's wedding to Autumn Kelly, Miss Davy's first official outing as the Prince's girlfriend at a formal royal family function.
January 2009: Friends discover the couple have broken up after Ms Davy changes her relationship status on Facebook to single. Harry is said to be "gutted".
September 2009: The split does not last long with the couple getting back together a few months after.
June 2010: The pair are said to have broken up again.
February 2011: The couple are reported to have rekindled their relationship with a romantic meal at a London restaurant.
April 2011: Harry reportedly tells Miss Davy at the wedding of the Duke and Duchess of Cambridge: "You're next". But the couple split again soon after the event.
November 2011: Miss Davy reportedly turns down a lucrative offer to write a kiss-and-tell book about her romance with Harry.
December 2013: The phone hacking trial heard how the News of the World's former royal editor, Clive Goodman, described Ms Davy "blitzing" Prince Harry with "dozens of calls".
September 2015: Reports suggest the pair are considering giving the relationship another try.
