Charles was spotted wrapping an affectionate arm around Zara and chatted happily with his 38-year-old niece and her rugby player husband Mike Tindall throughout the day.
The pair share a much less formal relationship than that of Charles and his daughters-in-law, Kate Middleton and Meghan Markle, 9Honey reports.
The British Sun attributes their close bond to the fact that "Zara is blood family", noting: "[Prince Charles] has known her since she was a baby...Charles is closest to his sister Anne, of all his siblings, and has always been very supportive and affectionate towards his niece."
Zara, neé Phillips, is the eldest granddaughter of Her Majesty Queen Elizabeth II and Prince Philip, the Duke of Edinburgh and does not hold a royal title per the request of her mother Princess Anne.
Zara and Mike are parents to daughters Mia Grace and Lena Elizabeth.
Charles and Zara were joined by the Queen, who travelled to Royal Ascot in a carriage with Prince Andrew and King Willem-Alexander and Queen Maxima of the Netherlands.
The Dutch royals are enjoying a state visit to Britain this week, attending the annual Order of the Garter ceremony at St George's Chapel in Windsor on Monday.
Other senior members of the royal family spotted at Royal Ascot include the Duke of York's daughters Princess Beatrice and Princess Eugenie, as well as Prince Edward and his wife Sophie, Countess of Wessex who were celebrating their 20th royal wedding anniversary.
Notable absences from Ascot were Prince Harry and Meghan Markle, who is still on maternity leave from royal duty with baby Archie Harrison.
Sarah Ferguson, the Duchess of York, was also missing from the event.