The Duke of Sussex, 38, revealed in his new memoir - which will be released next week - that his brother and sister-in-law thought the costume was funny.
Prince Harry attended the 'Native and Colonial'-themed birthday party thrown by Olympic show jumper Richard Meade for his son, also named Harry.
The Prince claims he was choosing between two costume options - a Nazi uniform or a pilot uniform.
"I phoned Willy and Kate, asked what they thought. Nazy uniform, they said," Harry writes in his book, according to Page Six.
LADbible has contacted Buckingham Palace for comment.
He then tried on the outfit for them to help solve the toss-up between both costume options.
"They both howled. Worse than Willy's leotard outfit! Way more ridiculous! Which, again, was the point."
Prince Harry attended the party with his elder brother Prince William, who reportedly wore a skin-tight black leotard with a leopard skin pattern which was paired with matching leopard skin tail and paws.
The Nazi outfit caused outrage and made global headlines after the then-20-year-old prince was photographed wearing the Nazi regalia. He was also featured on the front page of The Sun newspaper.
Prince Harry issued an apology not long after the image was published.
"I am very sorry if I have caused any offence or embarrassment to anyone," he said. "It was a poor choice of costume and I apologise.
The Invictus Games founder recently opened-up about the controversy in Harry & Meghan, the new Netflix docu-series about the Sussex's lives after moving to California and quitting royal duties.
In the third episode, the father-of-two expressed deep regret and said that the Nazi outfit was one of the 'biggest mistakes' of his life.
"All I wanted to do was make it right," he shared.
He met with the Chief Rabbi - who was Jonathan Sacks at the time - and spoke to a Holocaust survivor to repair the damaged caused by his major faux pas.
"It was one of the biggest mistakes of my life," he said.
"I felt so ashamed afterwards.
"All I wanted to do was make it right. I sat down and spoke to the Chief Rabbi in London, which had a profound impact on me.
"I went to Berlin and spoke to a holocaust survivor.
"I could have got on and ignored it and made the same mistakes over and over in my life, but I learnt from that."
Spare will tell the Prince's life story with 'raw, unflinching honesty,' says Penguin Random House.
The book will be released 10 January.