Lyrical Interpretation
One possible interpretation of the lyrics is that Lady Green Sleeves was a promiscuous young woman and perhaps a prostitute. At the time, the word "green" had sexual connotations, most notably in the phrase "a green gown", a reference to the way that grass stains might be seen on a woman's dress if she had engaged in sexual intercourse out-of-doors.
An alternative explanation is that Lady Green Sleeves was, through her costume, incorrectly assumed to be immoral. Her "discourteous" rejection of the singer's advances supports the contention that she is not.
In Nevill Coghill's translation of The Canterbury Tales, he explains that "green was the colour of lightness in love. This is echoed in 'Greensleeves is my delight' and elsewhere."
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