Australian Broadcasting Corporation (ABC) reported that the discovery raises serious questions about how secret cameras could be installed and remain undiscovered, potentially for years.
The Department of Foreign Affairs and Trade (DFAT) confirmed that a locally engaged ex-staff member at the embassy was arrested by Royal Thai Police on January 6.
Khemmarin Hassiri, commander of the foreign affairs division of the Royal Thai Police, said that the Australian embassy filed a complaint against a man on Jan 6. Thai police said the investigation was ongoing.
The former employee has dual Australian and Thai citizenship and until recently was employed as an IT systems manager at the embassy.
He had worked for DFAT since 2013, after living and studying in Australia and holding several other Australian government positions.
It is understood that multiple cameras were discovered directed at women's showers and toilets after an SD card containing images of female staff was found on a bathroom floor last year.
A government employee with knowledge of the incident said staff at the embassy were shocked and shaken.
"Female staff, Thai and Australian, are very anxious. Some of the women don't feel safe staying there. They feel compromised and threatened," the person said.
The person added that embassy staff wanted more support to "manage the serious psychological impacts of this matter, or even the possibility of serious security breaches".
It is not known how long the cameras had been in place or how much footage had been collected.
A Royal Thai Police investigator said it was "a sensitive case" that "involved many people".
The officer said forensic investigators were currently looking through the evidence and female police would be interviewing the women affected.
Police confirmed a man had been charged with two offenses under sections of the Thai criminal code which cover sexual and public nuisance offenses.
The charges carry a maximum penalty of 10 years' jail and/or a 20,000 baht fine.
The suspect, a married man in his 30s, was released on bail after spending one night in custody.
"If security was lax enough to allow devices like cameras to be installed anywhere within a secure area, it suggests it's not tight enough to keep the embassy secure," Hugh White, Emeritus Professor of Strategic Studies at the Australian National University, said.
The Australian Federal Police and DFAT declined to comment on whether there would be any Australian government or law enforcement investigation into the incident.
The Australian embassy in Bangkok is one of Australia's largest diplomatic missions in the world.