In 1561 Hatton played the part of Master of the Game at a masque at the Inner Temple, and on a similar occasion attracted the attention of Queen Elizabeth. Handsome and skilled, Hatton's dancing quickly won him the Queen's favour and the nickname "The Dancing Chancellor". He came to court, according to Naunton, "by the galliard, for he came thither as a private gentleman of the Inns of Court in a masque, and for his activity and person, which was tall and proportionable, taken into the Queen's favour." In 1564 he became one of the Queen's gentlemen pensioners and a gentleman of the privy chamber, and in July 1572 captain of the yeomen of the guard. On 11 November 1577 he became vice-chamberlain of the royal household and was sworn into the Privy Council. That same month he was knighted. In June 1578, the Queen formally granted him the Bishop of Ely's house in Ely Place, Holborn, despite vigorous protests from the Bishop. These appointments, with the valuable grants the Queen showered on him in these early years, prompted rumours that he was her lover, a charge specifically made in 1584 by Mary, Queen of Scots. There were certainly close personal relations between them. In correspondence the Queen called him her "Lyddes". He is said to have referred to himself in at least one letter as her "sheep". Yet Hatton "was probably innocent in the matter."