Palmer (36) and fellow Briton Vince Acors (34), a businessman, were arrested last month for their outrageous behaviour, but subsequently let on bail. They face up to six years in jail.
They were summoned to appear before Dubai's Court of First Instance Tuesday.
They admitted consuming alcohol but denied the other offences.
Palmer, from Oakham, Rutland, arrived dressed in a black trouser suit with an Arab-style scarf around her neck.
In a statement, she told Judge Hamad Abdul Latif: "We were just kissing and hugging. We didn't have sex together. I was lying on top of him. I have been in Dubai for two-and-a-half years without committing any kind of offence. I'm sorry."
Acors, a father-of-one and telecoms firm director from Bromley, Kent, who was visiting Dubai, said during police interviews that he did not know it was illegal to have unmarried sex in the UAE, but insisted he did not have full intercourse.
The couple's legal representative Hassan Mattar contradicted previous reports that there was DNA evidence proving the couple had sex.
He said: "My clients are innocent and they didn't engage in any sexual activity. The medical reports have proven that there was no sexual activity.
"The prosecution witnesses failed to confirm that the suspects were seen engaged in sexual intercourse.
"The Public Prosecution have also failed to produce corroborative evidence against my clients concerning the charges."
But witnesses statements submitted to the court present a different account of what happened on July 5.
One man, a 21-year-old Palestinian, said: "I was with my friends on the beach when I saw the couple get out of a taxi kissing each other.
"The man lay on his back and she was on top of him. She took off her shirt and they started to have sex.
"They were ten metres from me and they continued for ten minutes until a police patrol arrived."
The police officer who arrested the pair added: "Her shirt was off and she was sitting on him and their voices were excited.
"They didn't even notice me standing there. He was kissing and playing with her chest.
"I shone my torch on them and said: 'Excuse me.' It was then they noticed me."
Judge Hamad Abdul Latif adjourned the case and both Palmer and Acors were ordered to stay in the country until the next court hearing, which could be on September 2.
Outside of court, a male friend of Miss Palmer's told reporters she did not want to comment as media reports about the case had "destroyed her life".
Palmer has already lost her job with ITP Publishing.
In a previous interview, she had said: 'We are in so much trouble and my family and everybody are affected....
"I'm panicking - my mum is on antidepressants.
'Because this is known everywhere they're going to make an example of us and we're going to get a higher sentence,' she told the Sun.
Authorities under growing pressure to curb the excesses of westerners plan to deport Palmer at the end of her sentence, it is said.
Friends and colleagues of Miss Palmer described her as a 'good-time girl who is always out to party.'