The identity of the photographer is not known but the picture was sold to the Daily Mirror on February 26, 1981 - two days after Diana's engagement to the Prince of Wales was announced.
It seems, however, that the picture editor of the day had second thoughts about publishing an image of the future Queen in an intimate pose with another man and scrawled across it: NOT TO BE PUBLISHED.
The picture remained in the paper's archives until it was bought seven years ago by the private Caren Archive, which is now putting it up for sale through RR Auctions in New Hampshire.
The 8x10 inch photograph would normally sell for around £750, but because it has the 'not for publication' note on the top, the auctioneers expect it to fetch significantly more.
Amusingly, given the innocuous nature of the photograph, it is being marketed as a 'salacious teenage image of the future princess'.
Eric Caren, owner of the Caren Archive, which is the largest privately owned printed newspaper collection in the US, said he acquired the photograph simply by chance after asking the Mirror group if they would be interested in selling some of their archives.
Mr Caren said: 'It's an intimate photo - I don't know the man in the picture and he could be a friend or a boyfriend.'
Sources suggested the man could be Rory Scott, an early suitor of Diana's.
Mr Caren added: 'This would certainly not be the way the Royal Family would have wanted Diana to be presented at that moment, given that two days before her engagement had been announced.
'The fairytale between her and Charles was still intact at that point.
'My guess is that it was a privately taken photograph that the Mirror purchased but for some reason did not publish. Why the heck not I don't know - I don't know if it was pressure from the Royal family or an internal decision'.
Bobby Livingstone, vice president of marketing at RR Auctions, said: 'It captures the moment when the engagement had been announced two days before and the press were going mad over Diana - but the Daily Mirror just weren't going to publish this photograph of her in a comfortable position with a man other than Prince Charles.'
One of the late princess's closest male friends at the time, James Colthurst, once recalled going with her on a ski-ing holiday around the time in question.
He said: 'She slept on the sofa bed. It was fun. There were lots of pranks - Diana was great company - lovely, outgoing and frivolous and she enjoyed practical jokes.'
Bidding will take place over the internet between January 17 and 24.
- Daily Mail
