Karima El Mahroug, known by her stage name "Ruby the Heart Stealer," testified that she often received money from the then-prime minister at parties featuring women in "sexy" nurse and nun outfits, the Telegraph reported.
Berlusconi is accused of paying for sex with Mahroug, who was then 17 years old. The Morocco-born dancer, now 21, denies she ever sold herself for sex.
Prostitution is legal in Italy over the age of 18.
"The girls who were dressed in costumes approached him in a sensual way as they danced," Mahroug testified. "They raised their skirts. But I never saw any contact."
Mahroug described Berlusconi's famous "bunga bunga room," with its "pole for dancing" in the brick-ceilinged cellar in the basement of his villa.
Mahroug's testimony this week was for a trial separate from but closely related to Berlusconi's, in which three people stand accused of procuring prostitutes for the former prime minister.
Nicole Minetti, a showgirl who launched a career in politics with Berlusconi's help, Lele Mora, a talent scout, and Emilio Fede, a television host, deny the charges.
While on the stand, Mahroug said she first attended one of Berlusconi's parties on Valentines Day in 2010, and though she spent the night, she was given a separate room.
Prosecutors allege Berlusconi paid her as much as 4.5 million euros for sex.