The Smashing Pumpkins rocker is said to have grown weary of the attention their brief romance attracted, but has promised to remain friends with the singer-and-actress and he will still help with her new album.
A source close to Jessica, 29, said: "Jessica loved spending so much time in and out of the studio with Billy. She's in awe of his musical prowess, and it adds to her feelings for him, but they are not dating.
"Dating Jessica publicly can be intense. Billy maintains a quiet, private music-focused life and the taste of publicity he got while being with Jessica was an eye opener.
"Billy likes Jessica, but he will work to keep their relationship as it is and focus on the music. They are not getting serious, but Jessica has had so much fun with him."
Although friends were initially sceptical of the pair's romance, pals are delighted with the effect that Billy, 42, has had on unlucky-in-love Jessica.
The source explained to the New York Daily News newspaper: "Jessica really got fed up with doing things for other people. Jessica barely wears make-up these days. Her workout schedule isn't strict. She eats whatever she wants.
"She once was a slave to what people thought and said about her, and her time with Billy has brought out an even more mature and toned down Jessica."