The director of Sydney's Powerhouse Museum, who presided over a lavish fashion fundraiser using the museum's budget, has resigned.

Key points: Arts Minister Don Harwin today thanked Dolla Merrillees for guiding the MAAS through a "challenging and exciting phase"

Arts Minister Don Harwin today thanked Dolla Merrillees for guiding the MAAS through a "challenging and exciting phase" The luxurious fashion fundraiser's budget was propped up by $215,000 in public money

The luxurious fashion fundraiser's budget was propped up by $215,000 in public money The party raised $78,500 in donations for the Australian Fashion Fund

The NSW Government confirmed Dolla Merrrillees, who went on personal leave several weeks ago, will not return to the museum before her contract ends on September 7.

The ABC this week revealed the MAAS Ball, named after the Museum of Arts and Sciences, cost taxpayers more than $200,000 and raised just $70,000 for its new fashion fund.

The revelations sparked calls for Ms Merrillees' resignation.

A spokesman from the Department of Planning, which oversees the MAAS, said a decision to scrap the position of director was made when the Government in April confirmed its decision to move the museum to Parramatta.

Ms Merillees was advised she would need to apply for the new role of chief executive and on Thursday confirmed she would not.

Arts Minister Don Harwin was accused of misleading Parliament by NSW Upper House MP Robert Borsak over the affair.

He denied the claim and said: "The responses given to Parliament were based on advice received from the director of the museum."

Today, Mr Harwin thanked Ms Merrillees "for guiding the Museum of Applied Arts and Science (MAAS) through what has been a challenging and exciting phase".

"Dolla's leadership during the decision phase to move the Powerhouse Museum to Parramatta has helped lay the platform for the future of this treasured institution," he said in a statement.

Ms Merrillees took over as director of the MAAS in 2016, after it was earmarked for relocation to Parramatta by the State Government.

She has several times fronted an Upper House enquiry into the Government's decision to move the museum.