Carol-Ann Orr, the popular rocker's birth mum, happily posed for photos with racist Griffin at a BNP bash she attended with husband David Orr, who is standing as a candidate for them in the general election.
And the Record acquired the photo just hours after KT publicly disowned former Edinburgh cabbie Orr after discovering he was a candidate.
Her spokesman said: "She abhors the BNP and all they stand for."
But the singer will today be crushed to find the family embarrassment goes way beyond Orr's role as would-be BNP MP for Livingston.
The photograph, taken at the BNP's Scottish conference in March last year, shows her own half-Chinese mother socialising with the man who peddles racist filth in the name of politics.
It will be a major blow to the singer, who was reunited in 1996 with Carol-Ann, who gave her up for adoption as a baby.
Our source said that far from being embarrassed by her husband's extreme views, Hong Kong-born Carol-Ann happily attended the BNP conference and was openly bragging about her famous daughter.
The source said: "It was the BNP's annual Scottish bash in a hotel in Perth. There were loads of party guys up from England and they were all having a few drinks.
"Carol-Ann had had a few drinks and didn't make any secret of who she was. She was quite happy to brag about it, so someone said she should have her photo taken with Nick.
"You can see for yourself that they are both beaming. She had no problem at all having her photo taken next to Griffin and enjoyed it.
"There were a few people taking pictures on the night. It must be a real coup for Griffin to be photographed with KT Tunstall's mum, especially given her background."
Because of her ethnic background, 57-year-old Carol-Ann would not be welcome in the UK if the BNP ever came to power.
The party back "a system of voluntary resettlement whereby those immigrants who are legally here will be afforded the opportunity to return to their lands of ethnic origin assisted by generous financial incentives both for individuals and for the countries in question."
One family friend said: "It would seem short-sighted to say the least for Carol-Ann to be publicly getting cosy with the leader of a party which would be determined to kick her out the country."
Carol-Ann became pregnant during a fling with an Irish barman in Edinburgh. But she gave up her baby because of fears she would not be able to raise her properly.
KT was adopted days after she was born in June 1975 by lecturer David Tunstall and his wife Rosemary, a primary teacher.
The future Brit award winner was brought up in St Andrews, Fife.
She and Carol-Ann spoke publicly in 2006 about how they had first been reunited 10 years earlier in an Edinburgh pub.
David Orr, 61, whom Carol-Ann married in 1989, is also understood to have been at the reunion.
Carol-Ann was not invited to the singer's wedding to Luke Bullen in 2008, but the pair are understood to keep in touch.
KT said of her birth mothe r: "It's a completely different relationship to the one which I have with my family but I am glad she is there."
Carol-Ann said then: "Despite having three other lovely kids and a great husband, I still never felt at peace because I didn't know my eldest child. Now I feel content."
Her husband has been a BNP member for around 10 years and was confirmed as an election candidate last week, with Carol-Ann signing his nomination papers.
Orr yesterday admitted to the Record's sister paper, the Sunday Mail, that his candidature had caused problems in the family.
He said: "I've had Katie's people on the phone saying that she won't have anything further to do with me and doesn't want to see me ever again."
At her home in Livingston last night, Carol-Ann denied the Griffin picture was embarrassing.
She said: "I have no interest in politics. I don't support the BNP but I support my husband and I was at a function as a guest.
"We have an illness in the family just now and that is our priority. I have not seen the Sunday papers although I have heard plenty and I would not want to comment further."
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