The live show, hosted by Davina McCall, saw the psychic astrologer surprise the housemates, who had no idea that another contestant would be entering the house. Channel 4 only announced the news that a "housemate's ex" would be entering the house on Sunday night.
The "ex" part led many observers to suspect that it would be a former girlfriend or boyfriend rather than mother-in-law.
On seeing Stallone, Nielsen screamed: "Oh my God Jackie, oh my God…how are you sweetie? This is Sylvester's mom."
Mrs Stallone is reported not to like Nielsen, who she last saw when her son divorced her in 1987.
The other housemates looked on in disbelief, with Jeremy Edwards and Kenzie exchanging sideways smirking glances at one another.
Looking forward to her stay in the house, Stallone said: "It's a good excuse to stay drunk for a week. I really should take three bottles of vodka, but I'm afraid I'll get an ulcer."
Stallone was given the role of Queen Mother as "The Court of Big Brother" challenge continues. Lisa I'Anson has been given the role of queen and the other housemates are her servants, with varying roles including Greer as cook and Nielsen as the royal warmer -- having to warm the queen's bed and toilet seat before she uses them.
Stallone is also eligible to win the show and has been made exempt from the first round of nominations today. One of the original eight will be evicted on Friday January 14.
John McCririck, who is not talking to his fellow housemates after he was deprived of Diet Coke and milk, is the most likely to get the chop on Friday with odds of 5/4, while I'Anson is running close second with 2/1, according to bookmakers Ladbrokes.
Meanwhile, Edwards is clear favourite to win the show with odds of 2/1, while Kenzie slipped from 3/1 to 5/2 following his blazing argument with McCririck.
Stallone has also set her sights on walking away with the £50,000 prize money. "I intend to win. I've never lost anything in my life," she said.
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