Exclusive CCTV obtained by 9NEWS shows police confront Cronulla Sharks chairman Damian Keogh shortly before he was arrested for alleged drug possession outside a Sydney bar last night.

The video shows Keogh drinking at the bar. As he starts to walk away, he is approached by two uniformed officers.

The former basketballer, 55, was searched outside a bar on Bourke Street, Woolloomooloo before 8pm last night.

Damian Keogh was charged by police over drug possession.

NSW Police confirmed a small resealable bag containing white powder – believed to be cocaine – was found.

“The man has been issued a field court attendance notice for possessing a prohibited drug and will face Downing Centre Local court on June 30,” NSW Police said in a statement.

Cronulla Sharks CEO Lyall Gorman confirmed Keogh stepped down from his role as chairman in what he labelled a "very challenging, very disappointing day" for the sport.

"We're working with Damian at the moment... He needs the time to address the allegations and we'll allow him time to work through them and defend them as he chooses to," he said.

"He's very distressed (and) disappointed in potential outcomes for the club and the game."

When questioned whether Keogh apologised, Mr Gorman paused briefly before stating he had "expressed great remorse that he let me down personally".