The impromptu contest began early Wednesday morning, when both celebrities began dancing in the club's VIP section and continued for hours, with both women reportedly waiting for the other to stop first, People magazine reported.
Hilton and Lohan's dancing competition continued until 7 a.m., apparently without either woman acknowledging the other while dancing.
"They were really dancing, non-stop. It was funny," a source told People. "They didn't say a word to each other, but they were literally a foot-and-a-half away from each other the entire time."
The dance-off is the most recent event in what has been an ongoing feud between the celebrities. The incident stemmed from occurrence on Monday where Lohan was confronted by Hilton for dating her ex-boyfriend, Stavros Niarchos, People said.