Jeff McCormack, who managed Nationals leader John Barilaro's recent election campaign, has been appointed chief of staff to state Water Minister Melinda Pavey.
Senior NSW Nationals are "dumbfounded" a figure linked to the recent alt-right infiltration of the party's youth wing has been appointed to a plum ministerial job, while Labor is demanding he be removed.
AAP understands he'll take up the role within weeks.
Mr McCormack was one of two people named in parliament in 2018 by Labor MP Walt Secord who demanded to know whether the Nationals planned to expel him over a branch-stacking exercise that resulted in dozens of alleged neo-Nazis and white supremacists infiltrating the organisation.
The NSW Nationals in November 2018 issued a statement saying the party wouldn't rest until "every last one of these extremists" had been identified and removed.
Screenshots of a Young Nationals Facebook page, seen by AAP, show Mr McCormack added to the group some of the people who were later ousted from the party for their links to the alt-right.
About 20 young Nationals were either forced to quit or booted from the party in November after an internal investigation into the infiltration.
However, Mr McCormack was cleared by a speedy initial review and was not referred to the party's ethics committee, which conducted a more comprehensive investigation of other members.
There's no suggestion Mr McCormack holds neo-Nazi or white supremacist views.
Senior Nationals ministers and sources have expressed concern that Mr McCormack has been appointed to such a senior position within Ms Pavey's office.
"In what other party would someone who was tied up in a scandal that had the potential to derail a campaign be rewarded with a chief of staff role?" one senior Nationals source told AAP.
A Nationals minister said he was shocked and "dumbfounded" at the appointment.
"Certainly it will concern a lot of people within the party, both at the parliamentary level and the organisation level, given the reputation he has within the party," the minister told AAP.
Interim Labor leader Penny Sharpe has demanded Mr McCormack not be given the job.
She wants to know whether the appointment was approved by the premier's office.
"This is an arrogant move - and flies in the face of decency," Ms Sharpe told AAP in a statement.
"These groups have no place in Australian political debate and any individual linked to them should not serve in key government decision-making positions."
Another Nationals source said the appointment would cause a lot of angst within the party.
"To think that he's exerting some sort of influence or has some kind of status as a ministerial COS of a Nationals minister makes me question what the party is doing, what direction it's going and whether or not you still want to be part of it," they told AAP.
Mr McCormack and Ms Pavey been contacted for comment.