Lady Godiva under observation ends tale (4)
I believe the answer is:
yarn
'tale' is the definition.
(synonyms)
'lady godiva under observation ends' is the wordplay.
'ends' indicates one should take the final letters.
The last letters of 'lady godiva under observation' are 'YARN'.
(Other definitions for yarn that I've seen before include "that'll keep you in stitches?" , "Fabricated" , "A long tale" , "Sort of tale" , "Rambling story" .)