Carey, 45, and Packer were photographed strolling the street in Capri, Italy hand-in-hand. The pair is staying on Packer's yacht and will have "an extended vacation" to Cannes and St Tropez, reported Ace Showbiz.
Carey and Packer could be seen smiling widely while walking side-by-side.
The "We Belong Together" singer wore a plunging orange striped dress paired with a long black cardigan. She completed her look with sunglasses and black sandals. James, meanwhile, donned aviator sunglasses, a short-sleeved shirt, long pants and black shoes.
It was Carey's best friend Brett Ratner who reportedly played matchmaker for her and Packer.
Carey previously sparked dating rumors with Brett as they were preparing for their birthday back in March.