NSW Premier Barry O'Farrell must answer "serious questions" over his alleged involvement in a Sydney Water deal for a company linked to Eddie Obeid, the opposition says.
News Corp Australia reports federal Assistant Treasurer Arthur Sinodinos in 2011 met Mr O'Farrell's then-chief-of-staff to lobby for a $100 million contract Australian Water Holdings (AWH) was hoping to win from Sydney Water.
Senator Sinodinos is a former AWH chairman and shareholder.
Sydney Water eventually awarded AWH a 25-year contract.
A spokesman for Mr O'Farrell said the premier didn't meet Senator Sinodinos "in his capacity as chair of AWH".
"The awarding of the contract was a commercial decision for Sydney Water," he said in a statement.
But the spokesman acknowledged Mr O'Farrell in 2011 met with Nick Di Girolamo, a Liberal donor and majority owner of AWH.
Former Labor powerbroker Mr Obeid, who was found to have acted corruptly by the Independent Commission Against Corruption (ICAC), reportedly held secret shares in AWH.
Deputy state opposition leader Linda Burney says new AWH revelations raised "serious questions" about Mr O'Farrell's involvement in the water deal.
The premier must explain why his chief of staff was meeting with AWH executives, while at the same time deciding not to send the water deal decision to cabinet, she said.
The premier also needed to explain why Mr Di Girolamo invited him to dinner "just weeks" after AWH was awarded the contract, Ms Burney added.
Asked about the dinner, Mr O'Farrell's spokesman said the premier had "no meeting, lunch or dinner" with Mr Di Girolamo.
ICAC is reportedly set to investigate the AWH water deal.
Comment is being sought from Senator Sinodinos.
