US state favoured princess (7)
I believe the answer is:
indiana
'us state' is the definition.
(Indiana is an American state)
'favoured princess' is the wordplay.
'favoured' becomes 'in' (I've seen this in other clues).
'princess' becomes 'diana' (I have seen 'British princess' mean 'diana' so perhaps 'princess' could also mean 'diana').
'in'+'diana'='INDIANA'
(Other definitions for indiana that I've seen before include "State of southern US" , "American state" , "-- Jones, Harrison Ford role" , "Character associated with the Temple of Doom" , "___ Jones, action hero created by George Lucas" .)