Labour Party leader David Cunliffe says the resignation of Judith Collins is damaging to the National Party and there should be a full commission of inquiry into the matter.
Ms Collins has resigned as a minister after the Prime Minister's office received information suggesting that Ms Collins may have been engaged in discussions with a blogger in 2011 aimed at undermining the then Director of the Serious Fraud Office (SFO).
She has denied any wrong-doing.
Mr Cunliffe said words could not express how inappropriate those allegations were.
"This is very damaging but it would be more damaging to leave the Minister in place. This is an unacceptable set of behaviours. There now needs to be a full public and ministerial inquiry to ensure that this is not repeated and that the public knows exactly what happened."
Mr Cunliffe said the alleged actions of the Prime Minister's office as contained in the Dirty Politics book should be included in an inquiry.
Greens call for Royal Commission
The Green Party is welcoming the decision by Ms Collins to stand down as a minister but the party's co-leader, Metiria Turei, said the Prime Minister still refused to take the allegations against his own office seriously.
Ms Turei said there needed to be a Royal Commission into the allegations contained in the Dirty Politics book.
"John Key is also smeared by the allegations of dirty politics in his own office and he refuses to investigate those. So not only do we need to have an investigation of Judith Collins and her behaviour as a minister, but also what has been happening in John Key's own office and what implications there are for him."
She said the issue was that there was a pattern of behaviour across a number of minister's offices, including that of Mr Key, and the voting public had a clear choice.
More to resignation decision - Peters
New Zealand First leader Winston Peters is adamant Ms Collins' resignation is not simply in response to allegations she was part of a campaign to undermine the former director of the SFO.
Mr Peters said that is clear because Mr Key has said Ms Collins will not be re-instated if cleared by an inquiry into the matter.
"Everyone is entitled if they're innocent to be restored to their former position from which they were removed because of allegations, but it's not happening here. It tells you that she is going because of the other allegations, particularly to do with her disloyalty in election year to the Prime Minister."
Earlier in the week, Mr Peters said he had been approached by someone asking whether he would deal with Ms Collins after the election if she was the National Party leader.
Mr Key said yesterday he was backing Ms Collins 100 percent after she denied Mr Peter's claim.