Mr Hargreaves stepped down last night after Canberra Liberals' MLA Alistair Coe told The Canberra Times that the veteran politician and former minister sent him a note containing a ''homophobic'' message across the Legislative Assembly chamber while Mr Barr was speaking during a session in August 2010.

Mr Coe said the note, on Legislative Assembly paper, was passed to him from Mr Hargreaves while the openly gay Mr Barr was addressing the chamber about the Stromlo Forest Park.

''Stromlo is a park for mountain bikes, not for mount 'in men,'' the note reads.

Mr Hargreaves, who will leave politics at October's election, admitted last night to an error of judgment and a ''joke in bad taste.''

He said that he was no homophobe.

The Brindabella MLA handed his resignation to Chief Minister Katy Gallagher soon after the government was told that this newspaper planned to publish details of the note and the allegation.

Mr Coe said he found the message offensive and homophobic.

He said the 18-month delay in going public was his memory of the note had been ''jogged,'' this week by the fresh controversy surrounding Mr Hargreaves.

The alleged slur will severely embarrass Ms Gallagher.

Her government prides itself on its advocacy for minority rights and has promoted the territory as a leading jurisdiction in same-sex union laws.

The revelation came on the day that Mr Hargreaves apologised to the Assembly for an outburst last week when he referred to the Tuggeranong Community Council as a two-man self-help group for geriatrics.

Mr Barr, who was the public face in the successful push to change federal Labor's platform on gay marriage last year, once worked as chief of staff to Mr Hargreaves and the two men had a close professional relationship until a falling-out in late 2009 or early 2010.

He said last night that he did not believe that Mr Hargreaves meant to slur him.

Mr Hargreaves, who has had an incident-packed career, said last night that he rejected Mr Coe's allegation of homophobia.

''I reject that, outright,'' Mr Hargreaves said.

''The note is a joke in poor taste and it shows a lack of judgment.

''My record on supporting the rights of gays, lesbians and others in their fight for equal treatment before the law stretches back over 20 years.''

Mr Hargreaves said he had been targeted by the Liberals as political payback and emphatically denied slurring Mr Barr. ''I'm outraged that the Liberal Party, trying to attack me as some sort of payback, would do it in this manner,'' he said.

Mr Coe said that the matter had been pushed to the bottom of the pile in the 18 months since the incident.

''At the time, I found it pretty offensive and I wanted to reflect on it, on what to do about it,'' he said.

''Other priorities stacked up and to an extent, it got pushed to the bottom of the pile.

''But over the past week or so, some of the things that he has been saying jogged my memory.''