The BBC has promised to "get to the truth" about the events surrounding the Panorama interview with Princess Diana.
Diana's brother has alleged the BBC's Martin Bashir used forged bank statements to convince her to do it.
Kensington Palace said in a statement that Prince William "tentatively welcomed the investigation".
The prince, whose mother died in 1997, added: "The independent investigation is a step in the right direction.
"It should help establish the truth behind the actions that led to the Panorama interview and subsequent decisions taken by those in the BBC at the time."
On Wednesday, the BBC announced that Lord Dyson, one of the country's most senior retired judges and a former Supreme Court judge, had been appointed to lead the inquiry.
The BBC's director general, Tim Davie, said: "The BBC is determined to get to the truth about these events and that is why we have commissioned an independent investigation.
"Lord Dyson is an eminent and highly respected figure who will lead a thorough process."
Diana's brother, Earl Spencer, called for an independent inquiry earlier this month, saying "sheer dishonesty" was used to secure the interview with the princess.
In a letter to Mr Davie, reported by the Daily Mail, the earl said Bashir had used forged bank statements - which wrongly purported to show that two senior courtiers were being paid by the security services for information on his sister.
Earl Spencer wrote: "If it were not for me seeing these statements, I would not have introduced Bashir to my sister."
In another Daily Mail interview, he also alleged that the then Panorama reporter made a number of false and defamatory claims about senior royals during a meeting with him, in order to gain his trust and access to his sister.
These claims included that Diana's private correspondence was being opened, her car tracked and phones tapped - described by the Mail as "preposterous lies".
Bashir, 57, currently BBC News religion editor, is recovering from heart surgery and complications from Covid-19 and has been unable to comment on Earl Spencer's allegations.
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