According to Australia's NW, Pete popped the question to 22-year-old Ashlee on July 7, right before Fall Out Boy played their set for the Live Earth concert in New York. A friend told the tabloid, "Ashlee wasn't expecting it at all, it was a total surprise. Pete whipped out a big engagement ring, dropped down on one knee, and asked Ashlee to be his bride. Ashlee says it was romantic, sexy — and that she said yes right away."

Another source says, "Ashlee and Pete are desperate to keep the engagement quiet for as long as they can so they can make wedding plans in peace. She definitely doesn't want a big circus wedding like Jessica had when she married Nick. All she wants is a simple ceremony with her family, his family, and a handful of people." But if Ashlee's not careful, the news of her engagement will spread quickly. NW's sources claim that the former MTV reality show star has been blabbing to everyone she knows.

One thing Simpson is staying mum about is the fact that she may be pregnant. Says one snitch, "Ashlee may have helped start the [pregnancy] rumors herself. She was at a family wedding and was wandering around rubbing her belly. And she refused to drink anything." But another friend rationalized Ashlee's behavior that night: "She probably didn't drink…because her dad was around." And another pal chimed in, "We don't think they were officially engaged 20 minutes before she started calling people to spread the news. If she were having a baby she wouldn't be able to keep it to herself for five minutes."