Opposition Leader Bill Shorten’s office has been caught up in a blackface scandal with a key adviser resigning after a photo was circulated of the aide wearing the “unacceptable” costume.

Amid factional tensions within Victorian Labor, a photo of Steve Michelson wearing blackface at a party in 2007 was recently circulated within party circles, The Australian reported.

A spokesman for Mr Shorten confirmed on Monday that Mr Michelson resigned from the Opposition Leader’s office last week “following a discussion with Mr Shorten”.

“This conduct – which occurred many years ago – is clearly unacceptable, and out of character for Mr Michelson, who was a valued and diligent staff member,” the spokesman said.

Labor staffer Steve Michelson quit his post after this photo was circulated. Photo: Supplied

Mr Michelson, who had worked for Mr Shorten for six years, said the photo was a mistake.

“I was young when this photo was taken and made a terrible decision,” he told The Australian.

“In the more than 10 years since then I’ve learnt why this type of behaviour is completely inappropriate.”

He wrote in an earlier Facebook post: “I’ve decided to hang up my staffer boots to spend more time with my family.

“Working with Bill Shorten and the entire Labor team has truly been a privilege, however the time has come for two little kids to see a bit more of their Dad.

“I still passionately believe in the Labor Party and the union movement. I’m also more sure than ever before that a Shorten Labor government will do great things for everyday Australians.”

The New Daily attempted to contact Mr Michelson.

Mr Michelson was among key staff thanked by Mr Shorten when he addressed the Labor caucus after the 2016 election.

A former party branch president, he has been touted as a future federal Labor candidate for the south-eastern Melbourne seat of Isaacs, currently held by opposition frontbencher and Shadow Attorney-General Mark Dreyfus.

Mr Shorten’s office faced criticism earlier in the year over the lack of cultural diversity in an ‘Australia First’ ad featuring the Opposition Leader.