Andre, 42, claimed in court that he found out about the burn during the filming of his ITV2 show Peter Andre: The Next Chapter and part of his reaction was caught on air.
The incident occurred after Price had taken the kids on a holiday in Switzerland in 2011 and Price was cleared of any wrongdoing by Surrey Police.
Andre claimed, while speaking at the Queen’s Bench Division Commercial Court, according to The Mirror: "She [Princess] had a horrific burn on her back and her skin was coming off, and there were no bandages on."
Andre was speaking in court as a witness in a contract dispute between his former TV producer and ITV2.
Neville Hendricks is suing ITV2 for £549,060 damages and costs, reported The Mirror, after the incident called a halt to him producing its reality shows in August 2011.
Andre described in court the moment he went to pick up his daughter from his cousin's house, and claimed his cousin told him not to look at Princess' back because he would "scream".
When Andre found the burn, he told the court he tried to call Price but couldn't get hold of her.
He claimed he confronted Price about the burn days later when she came to pick the children up from his house, but said she "just said something about a sauna".
Katie Price was cleared of wrongdoing in February 2011, after the police concluded they would take no further action.
At the time, Price released a statement which read, according to the Daily Mail: "I am naturally delighted that the police have concluded their investigation into the minor burn that Princess sustained while she was in Klosters.
"The police have informed me that they are satisfied that the account provided of how the injury was sustained and the nature of that injury was accurate. It follows that they consider there are no child protection issues.
"Having the police investigate and seeing headlines about child abuse and my ex-husband being 'horrified' at what he called a bad burn have caused terrific strain."
Andre appeared in court just days after marrying Emily MacDonagh.
The hearing continues.