The `Gossip Girl` actress - who split from her first husband, textile heir Arun Nayar last December, with their divorce completed in the summer - reportedly said yes when former cricketer Shane Warne popped the question after they dined in the Road Hole Restaurant at the exclusive Old Course Hotel in St. Andrews, Scotland.
An onlooker told the MailOnline website: "Shane proposed over dinner and it was fairly public, not a private affair.
"It was a VIP crowd in there this evening. It was residents only, including Dunhill past players.
"He didn`t get down on one knee, but when it was announced the other guests in the restaurant stood up and applauded. Everyone there was absolutely delighted."
A spokesperson at the hotel - where the couple were staying while attending the Alfred Dunhill Links Championship - said they were unable to comment on the news.
Elizabeth has a nine-year-old son, Damian with former flame Steve Bing, while Shane has children Brooke, Summer and Jackson with his ex-wife Simone Callahan.
The couple have been dating just 10 months but it was revealed earlier this week that Shane was keen to make their union official as soon as possible.
A source said: "Liz and Shane have a really happy, fun and secure relationship. They are forever giggling. Shane absolutely adores her and is keen to make their relationship official.
"He plans on proposing before Christmas, with the couple having a low-key wedding late next year. Shane is romantic and a traditionalist, and will definitely get down on bended knee to do the deed."