The pair worked on the new track when they recently met up in Los Angeles and are currently deciding whether they will shoot a music video for the cut.
Sheeran told Capital FM: "We've just done a song together so we were talking about shooting a video for that."
The 'Lego House' star also revealed that he is putting the final touches to his new EP, which will feature a duet with his "favourite artist".
Meanwhile, both Sheeran and Example have picked up nominations at this year's Brit Awards and will compete in the 'Best British Single' category.
Speaking about the nominations, Sheeran added: "We texted about the nominations which was nice – he's got 'Best British Single' nomination as well which is good.
"There's not really much competition. It's like one big British movement moving forward, which is good."
The 20-year-old performer has also been nominated for 'Best British Album', 'Best British Breakthrough Act' and 'Best British Male'.
> Brit Awards 2012 nominations in full
> Ed Sheeran wants to 'take risks' on second album
Watch Digital Spy's interview with Ed Sheeran at the Brit Awards 2012 launch below: