The casino mogul and his long-time friend and former best man David Gyngell traded punches and wrestled on the ground on Sunday afternoon at Bondi Beach, with the incident captured by a paparazzi photographer.
Rupert Murdoch's News Corp. bought the pictures and video clips for a reported Aus$250,000 (US$232,000) with the tabloid Sydney Daily Telegraph devoting nine pages to the scandal, including a front page splash headlined "Packer Whacker".
Packer, 46, left his multi-million dollar Bondi home Tuesday with a black left eye, to face news that police were investigating the fight and appealing for witnesses to come forward.
"Eastern Suburbs Local Area Command has commenced an investigation into an incident that occurred about 2pm Sunday on Sir Thomas Mitchell Road near the intersection of Campbell Parade at Bondi Beach," a statement said.
"Police have not yet received an official complaint but have appealed to anyone who witnessed, or has vision or images of the incident."
The images taken by a photographer who was in the area hoping to snap Packer with rumoured new love interest, supermodel Miranda Kerr, sparked a bidding war, with the Murdoch press emerging the winner.
The Telegraph and other media said Packer and Gyngell, who have been friends for 35 years, fell out after the casino magnate split with his wife Erica six months ago.
Reports said tensions had been building ever since, with Packer apparently fuming that a Nine Network news truck was parked near his Bondi beach pad and that he would be "doorstepped" on his arrival home from the airport.
Gyngell reportedly assured him in a testy phone call it was a coincidence, but personally went to investigate. He was there when Packer arrived home and the verbal abuse quickly escalated into a fight that one witness described as "like two mad dogs going at each other's throats".
They were eventually restrained by Packer's driver and two others as they grappled on the ground.
The day after the melee Packer and Gyngell -- who went to the same exclusive Sydney school -- released a joint statement insisting they remained friends.
The son of the late media baron Kerry Packer, James Packer is one of Australia's wealthiest people with a personal fortune estimated at Aus$6 billion (US$5.6 billion). The family company used to own the Nine Network, but sold their final stake in 2008.
Since his father's death in 2005, Packer has moved the family business away from its traditional media operations and focused on creating Crown, a worldwide gambling empire.