The Sunday Times revealed the 92-year-old monarch blocked the Sussexes plan to live independently from the royal establishment, which they had hoped to put in place before the birth of their first child in April.
According to a royal insider, the structure of the Windsor institution simply "doesn't allow that kind of independence".
The announcement declared the decision to create a new official residence at Frogmore Cottage for Harry and Meghan had the support of both the Queen and the Prince Charles.
But it seems that support only exists so long as Harry and Meghan keep their Household Office at Buckingham Palace.
The news comes as speculation mounts about what name the Duke and Duchess will choose for their first child.
9Honey's royal expert Victoria Arbiter predicts a "stable" name that offers continuity, while Express.co.uk claims the front runner for a baby girl is Alexandra, the Queen's middle name and the name of King Edward VII's consort, Queen Alexandra.
Another favourite is Alice, the name of Queen Victoria's beloved second daughter who - just like Meghan - was a dedicated patron of women's rights and causes.
Alexander is a strong contender for a royal baby boy, as is Albert which is one of Prince Harry's middle names and also the name of the late Princess Diana's grandfather.