Eamonn Casey, the former bishop of Galway, who has died aged 89, might have been remembered as one of the most socially liberal figures in the deeply conservative Irish Roman Catholic hierarchy but for his sudden resignation in 1992 following the revelation that he had fathered a son 17 years earlier and paid maintenance to the child’s American mother out of diocesan funds.

The story, which convulsed the church and fascinated the country, was perhaps the first breach in the church’s hitherto impregnable authoritarian hold over Irish society, as it was yet to be discredited for the child abuse scandals and treatment of single mothers that have undermined its reputation since then.

Casey had refused to acknowledge the boy, Peter Murphy, whom he had met only once, in a lawyer’s office in Boston while negotiating the funding of his college fees. Murphy said later that he had been treated “like a small clerical error in his life … a dirty little secret”.

When the scandal broke in the Irish Times in May 1992, Casey flew to Rome to tender his resignation and then retreated to a monastery in the US before engaging in missionary work in Ecuador for six years. Subsequently he became a parish priest and hospital chaplain at Staplefield, near Haywards Heath, West Sussex, returning permanently to Galway in 2006 after retirement.

His relationship with Peter’s mother, Annie Murphy, who was a friend of a friend, had begun in 1973, within three weeks of her arrival to stay with him to convalesce after the breakup of her marriage in the US. Casey, then bishop of Kerry, was the youngest member of the Irish episcopacy; appointed at the age of 42 four years earlier, he was regarded as a rising star in the church.

When the child was born the following year, Casey tried to persuade Annie to have him adopted. Instead she returned to the US and later remarried. Over subsequent years the bishop, who was translated to the diocese of Galway in 1976, surreptitiously sent her $275 a month, garnered from diocesan reserve funds. He had previously maintained that “any clergyman with more than four figures in the bank has lost his faith”. The money was later repaid to the diocese by an anonymous donor.

The relationship became public after negotiations broke down over payment of Peter’s college fees. Annie, who had called for a payment of $150,000, went to the Irish press to reveal the affair. In a subsequent book revealing details of their relationship, she expostulated: “He was a goddam bishop. Where had he learned all this?”

Casey retained some public sympathy. When Annie appeared on RTÉ’s The Late Late Show, its presenter, Gay Byrne, controversially told her: “If your son is half as good a man as his father, he won’t be doing too badly.”

Casey was the second son in a family of five sons and five daughters and was born in Firies, County Kerry. His parents were John, the manager of a creamery, and Helena (nee Shanahan). Eamonn was educated at St Munchin’s college in Limerick and trained for the priesthood at Maynooth, being ordained in 1951.

In 1960 he was transferred to a parish in Slough, Berkshire, where he became involved in helping impoverished Irish immigrant families, particularly over their housing problems. He became a director of the Catholic Housing Aid Society in Westminster, appeared in Ken Loach’s drama-documentary Cathy Come Home, and in 1966 helped to found the charity Shelter, serving as chairman from 1968. The campaigner Des Wilson recalled in his memoirs: “Everyone in Shelter loved him … Eamonn was deeply devout but he was a fun-loving man. He was the life and soul of any party.”

Back in Ireland after his appointment as a bishop, Casey became known not only for his enjoyment of driving – and crashing – fast cars in the narrow roads of his diocese, but also for his outspokenness on social issues. He supported the staff of a supermarket chain when they boycotted fruit from apartheid South Africa and organised the refusal by some Irish bishops to meet Ronald Reagan on his visit to Ireland in 1984 because of the US administration’s policies in central America. Casey had been present in 1980 at the funeral of Archbishop Óscar Romero, an outspoken critic of El Salvador’s military dictatorship, who was assassinated while celebrating mass in San Salvador.

In 1973 Casey helped to found the Trócaire charity, providing aid to communities in the developing world, and the following year he chaired a meeting of a support group for unmarried mothers, during which he castigated fathers who did not recognise their responsibilities to their children.

Some young priests noted that he was doctrinally conservative and not notably sympathetic if they got into the sort of difficulties he experienced himself. Only after his exposure did he acknowledge that he had “sinned grievously against God, his church and the clergy and people of the dioceses of Kerry and Galway”. He also developed a late relationship with his son.

He is survived by Peter and by his brother, Michael, and sister, Ita.

• Eamonn Casey, priest, born 27 April 1927; died 13 March 2017