The 'Lord of the Rings' actor - who split from Australian supermodel Miranda Kerr in October after three years of marriage - was spotted cuddling up to the singer as they soaked up the sun together in Ibiza on Thursday (31.07.14).
The duo looked extremely close and at one point it appeared Orlando leaned in to kiss her on the luxurious boat, Seahorse, according to the MailOnline.
The 37-year-old star was later seen pulling Erica up to dance as he moved enthusiastically to Pharrell William's track, 'Happy,' in a restaurant, before kissing her hand, according to gossip website TMZ.com.
Erica, 37, split from Australian billionaire James Packer, 46, last year, who has since been linked to Miranda, 31.
The former couples holidayed together several times in the past and Orlando has son Flynn, three, with Miranda, while Erica has three children with James.
But former Victoria's Secret beauty Miranda recently denied she and James were romantically involved.
She said: ''We've been friends for years. [Rumours] happen all the time with me, it happens to Orlando [too]. We understand it. As long as we both know [the truth], then it doesn't really matter what people think. People can speculate as much as they like.
''You're with a friend and then they assume that just because you're with a friend it's suddenly: that's your new partner. People just assume, just because you're going to have a coffee with someone or have dinner, then suddenly you're dating!''
However, earlier this week it was claimed Miranda had been making secret visits to the businessman's hotel.