Mr Key acknowledged the court action today while speaking to reporters in Hamilton.
"We've been aware for some time now that he's likely to file proceedings for defamation and we'll be defending that action.
"I'm not really going to go into any great comments about it. It's a matter that's before the courts so we'll just leave it there."
Mr Ambrose was faced criminal investigation after he taped a conversation between Mr Key and Act's Epsom candidate Mr Banks at an Auckland cafe just before the November 2011 election.
Mr Ambrose said the recording was accidental but Mr Key said the recording was illegal and laid a complaint with police.
Police eventually decided not to lay charges but Assistant Police Commissioner Malcolm Burgess said investigators had concluded the recording was more likely than not to have been deliberate.
Last year Mr Ambrose said he was considering defamation action against Mr Key for saying that Mr Ambrose had broken the law.
He claimed to have lost "tens of thousands of dollars'' worth of work as a result of the controversy.
"I became completely disillusioned with the people running the country. And that's coming from someone who's been a National voter for 18 years``, he told reporters in May last year.
