The New South Wales Government has been rocked by another scandal, with transport minister David Campbell quitting his portfolio after being caught using his ministerial car to visit a gay sex club.

Footage obtained by Channel Seven and broadcast on Thursday shows the senior frontbencher leaving Ken's at Kensington in Sydney's eastern suburbs on Tuesday night. The club bills itself as a venue for men who prefer men and offers a sauna, steam room and lounge.

Mr Campbell allegedly drove himself there in his ministerial car. Sources have told the ABC there was a loud argument in his office on Thursday afternoon.

Mr Campbell announced his resignation in a statement last night, saying he was quitting for personal reasons.

He said the reasons behind his resignation did not relate to his ministerial duties.

In the statement he apologised to his wife, family, colleagues, staff and the community for letting them down.

He also asked for his family's privacy to be respected and said it would be a difficult time.

Mr Campbell said he would remain the Member for Keira.

"I am incredibly proud of my achievements while serving as minister for transport, roads, police, small business, the Illawarra, regional development and water utilities," Mr Campbell said in the statement.

New South Wales Premier Kristina Keneally has asked the community to show understanding towards Mr Campbell.

Ms Keneally says she has accepted his resignation on compassionate grounds as he clearly needs time to work through a difficult period with his family.

In a statement, she has thanked him for his tireless work and says he has carried out his ministerial duties with dedication and success.

While Mr Campbell reportedly drove to the venue in his ministerial car, the ABC understands that is not a breach of the rules as the guidelines allow the cars to be used for personal reasons.

Public interest?

Mr Campbell's last few months as transport minister were tough.

He weathered heavy criticism for his handling of a massive traffic jam on the F3 freeway that connects Sydney and Newcastle.

His departure also comes soon after Labor backbencher Karyn Paluzzano resigned from Parliament after she admitted lying to the Independent Commission Against Corruption about falsifying employee pay forms.

The journalist responsible for breaking the story, Adam Walters, says it was in the public interest to broadcast details of Mr Campbell's personal life.

"It's blindingly obvious that since 1999 Mr Campbell has purported to be a family man," he said.

"He's represented himself to the people of Kiera as a family man, even going to the extent of sending Christmas cards to his constituents highlighting the fact that he is a man of family values.

"This is about pretence, it's about integrity, it's about character."

Kellie MacDonald from the Gay and Lesbian Rights Lobby says it is disappointing so much attention has been paid to Mr Campbell attending a gay club.

"I think it is indicative of a homophobic culture to focus on the fact he was at a gay venue rather than focus on the fact he was allegedly misusing government resources," she said.

Cameron Murphy from the NSW Council for Civil Liberties says he is worried that what should be a private matter for Mr Campbell has entered the public arena.

"This is essentially a private matter. It is a matter for him and for his family. It has got nothing to do with anybody else. No-one's sexuality is a matter of public interest," he said.

Cabinet reshuffle

Mr Campbell's resignation has sparked a reshuffle.

John Robertson will be the new Transport Minister while David Borger has been handed roads.

Mr Borger's housing portfolio has been given to backbencher Frank Terenzini, who also picks up small business.

Mr Robertson's portfolios have been handed to Paul Lynch. Peter Primrose has also been given extra responsibilities.

A swearing in ceremony will be held as soon as possible.

Mr Campbell recently came under pressure to resign over his handling of an accident on the F3 north of Sydney. The accident left motorists stranded for hours.

The Opposition also called for him to stand down over the tens of millions lost on the scrapped CBD Metro.

While the opposition leader Barry O'Farrell has declined to comment formally on Mr Campbell's resignation, he has responded on Twitter.

Mr O'Farrell says he is concerned the reshuffle means more delay in fixing the state's problems, as Government MPs try to get themselves up to speed in new portfolios.

Chris Brown from the Tourism and Transport Forum says he is hopeful the change of minister will bring about a fresh pespective on Sydney's congestion problems.

"I'm confident in what we're hearing already that there might be a renewed focus on western Sydney particularly and the needs of how we cope with 7 million people in this city," he said.

'A scandal every few months'

The resignation is yet another blow for the scandal-plagued New South Wales Labor Government.

Former Premier Morris Iemma used to joke there was a scandal for the State Government every few months.

However, just two weeks ago the Parliamentary Secretary Karyn Paluzzano quit parliament after admitting lying to the state's anti-corruption body, the ICAC.

Last year John Della Bosca Bosca quit his health portfolio when it emerged he had had an affair.

Tony Stewart was sacked as small business minister after he was accused of inappropriate behaviour towards a staff member.

After less than a week in the job, Matt Brown was sacked as police minister for dancing in his underpants at a party, while in 2006 Carl Scully resigned from the police ministry for misleading parliament

Former Aboriginal affairs minister Milton Orkopolous was jailed for child sex offences in 2008.

Additional reporting by Mark Tobin, Michelle Brown and Mark Douglass.