Fortunately for Australia, the inaugural, visionary director of the National Gallery, James Mollison, bought 36 crisp vintage photographs from the Arbus Estate in 1980/81. All of these photographs are being shown together, for the first time, accompanied by a selection of works by other contemporary photographers of the American social landscape, including Garry Winogrand, William Klein and Lee Friedlander.

Born into a wealthy Jewish family in New York, Arbus initially worked in fashion photography before embarking on her own creative work after serving an apprenticeship for a couple of years with the photographer, Lisette Model. Arbus' gift was to expose the inner lives of people in a somewhat brutal and confronting manner, but in the process achieve a touch of intimacy and mystery. Following in the footsteps of Model, Arbus photographed people on the fringes of society, including strippers, nudists, transgender performers, dwarfs, giants, prostitutes and people with intellectual disabilities. Unlike Friedlander and Winogrand, where frequently there is the sense of a candid moment (no matter how contrived), Arbus deliberately posed her subjects for the camera, where they consciously appeal to our humanity. She waited until her subjects looked into the lens, so that they would confront the viewer.

A Boy with a straw hat waiting to march in a pro-war parade (1967) is a remarkable image of a young lad with a bow tie and hat, holding a US flag and with badges on the lapels of his suit reading "Bomb Hanoi" and "God bless America. Support our boys in Vietnam". Using a flash exposure to light up the face that is shown contrasted against a dark stonewall and employing the square format, a tightly framed composition and the piercing frontal gaze, Arbus creates something of a hypnotic stare. Despite the emblems of patriotism, there is a shadow of doubt in the eyes of the boy. Arbus, who marched against the American bombing of Vietnam, creates an ambiguous and questioning image that perfectly captures the spirit of her time, when an increasing number of Americans were questioning their government's foreign policies. Is this patriot becoming increasingly an outsider and no longer part of the confident mainstream?

While sometimes described as a photographer of freaks, Arbus' photographs of the social fringes, when viewed as a composite, reflect the centre and the whole of American society. Patriotic young man with flag, NYC (1967) may suggest to us a delusional fanatic, but it is also an image of a nationalist zealot who continues to this day to play a role in American political life. Child with a toy hand grenade in Central Park (1962) has a young and somewhat dishevelled boy grimacing as he clutches a hand grenade in his right hand. Arbus took a series of photographs of this skinny kid, but selected precisely this image of confrontation for her final print. She printed her photographs herself and used matting in the process that gave many of the images a darkened outer frame. Arbus ascribed to a Zen-like philosophy of photography and once said: "A photograph is a secret about a secret. The more it tells you the less you know."

Other photographs in this exhibition, including A Jewish giant at home with his parents, in the Bronx, N.Y. (1970) and Identical twins, Roselle, New Jersey (1967) play with the viewer's emotional response. Arbus reputedly said about her image of the Jewish giant, "You know how every mother has nightmares when she's pregnant that her baby will be born a monster? ... I think I got that in the mother's face". Confronting and uncompromising, Arbus' lack of political correctness continues to intrigue and puzzle her viewers with mixed feelings of voyeurism, revulsion and awe. Her attitude to her subjects was complex and at one stage she observed: "Freaks was a thing I photographed a lot. It was one of the first things I photographed and it had a terrific kind of excitement for me. I just used to adore them. I still do adore some of them … There's a quality of legend about freaks. Like a person in a fairy tale who stops you and demands that you answer a riddle. Most people go through life dreading they'll have a traumatic experience. Freaks were born with their trauma. They've already passed their test in life. They're aristocrats."

Arbus was a photographer who achieved a cult status, particularly following her suicide at the age of 48. She was the first American photographer at the Venice Biennale; a monograph that accompanied her touring show in the 1970s, remains the best selling book on a photographer ever published; and the 2006 movie Fur: An Imaginary Portrait of Diane Arbus, with Nicole Kidman playing Arbus, has helped to keep her legend alive in the popular imagination. Her impact on subsequent photographers, including Cindy Sherman, has been immense, both in her techniques and in the general aesthetic that she introduced to documentary photography.

The extraordinary selection of work in this exhibition, which in many galleries around the world would be termed a "blockbuster", in Canberra passes as a minor exhibition of work from the gallery's collection. Viewed by many as a chronicler of her time who captured the zeitgeist of 1960s America, Arbus also introduced a particular aesthetic into 20th century photography, one where the human portrait is given a haunting intensity.

Diane Arbus: American portraits, Orde Poynton Gallery, National Gallery of Australia. Closes October 30