Mr Orkopoulos, 49, was arrested this morning by police at Belmont on Lake Macquarie, on NSW's Central Coast, and was expected to face court today on a total of 30 charges, police said.
The charges include counts relating to aggravated indecent assault, child prostitution, homosexual intercourse involving persons aged 10 to 18 and supplying prohibited drugs, a police statement said.
Sydney’s The Daily Telegraph website was reporting that some of the offences occurred at Parliament House and Orkopoulos’s electoral office.
Premier Morris Iemma said he had dismissed Mr Orkopoulos from cabinet and expected him to resign as MP for the Hunter-based seat of Swansea.
"As this matter is now before the courts, the law must take its course and it would be entirely inappropriate for me to make comment on the matters that are going to be before the courts," he told reporters.
Mr Iemma said he had no information on the precise allegations made against Mr Orkopoulos but was told last night an investigation was underway and that charges were pending against the MP.
Community Services Minister Reba Meagher will take over the Aboriginal Affairs portfolio until after the March 24 state election.
A new MP for Swansea will be chosen at the election and Labor MPs Matthew Morris and Jeff Hunter will help represent local residents until then.
Mr Iemma said he had moved swiftly to sack Mr Orkopoulos from cabinet and he should now quit the parliament.
"Let me be clear about this: I make no judgment on his guilt or innocence.
"This is now a matter that's before the courts and I have no information as to the detail of the charges.
"The only way for Mr Orkopoulos to proceed in this matter is as a private citizen," he said.
Mr Orkopoulos, who is married with three children, was first elected as the Member for Swansea in 1999.
He has served as Aboriginal Affairs Minister since 2005, when he also took on the role of Minister Assisting the Premier on Citizenship.
He is a former convenor of Labor's Left faction in the NSW Parliament.
Mr Iemma stressed his abhorrence of sexual crimes against children.
"Let me say now that there is no worse crime than child sexual assault," he said.
"Perpetrators of these crimes should be condemned in the strongest terms possible and face the full force of the law.
"My government has the toughest child protection laws in the country."
The minister's arrest and sacking threaten a new crisis from the Iemma government.
Mr Iemma last month sacked Police Minister Carl Scully for twice misleading parliament.
He has also been under pressure to sack Local Government Minister Kerry Hickey, who has been caught speeding four times - three times in a ministerial car.
Asked if his government was falling apart, Mr Iemma said: "Absolutely not."