Max posted an outtake from the photo shoot on his Instagram page overnight, sparking an outcry from some of his 38,000 followers.
Mr Key said his son Max is "vehemently" opposed to smoking and his being photographed in his underwear holding a cigarette doesn't contradict that stance.
"He's a young guy, he's a man now, he is capable of doing his own things. And I think it's quite cool, the photos look good."
Asked about the photos featuring the unlit cigarette, the Prime Minister said often during modelling shoots people were asked to pose with props.
He is actually vehemently opposed to smoking, and to the best of my knowledge he has never smoked.
"In the end, people when they are doing modelling shoots are often asked to do things that they don't do things themselves. He is actually vehemently opposed to smoking, and to the best of my knowledge he has never smoked.
"He is certainly someone who speaks to me all the time about being opposed to smoking. But people wear all sorts of things and do all sorts of things when they are doing modelling shoots."
John Key and son Max on holiday in Hawaii in 2014. Photo / via Instagram
The controversial photo comes just a week after tough new anti-smoking plans were announced by the National government, led by Max's father, Prime Minister John Key.
Those plans included plain packaging and larger health warnings on cigarettes, and further tax hikes.
"Nothing kills you with greater predictability than smoking," Mr Key said at a Smokefree event in Wellington at which the plans were unveiled.
"It will take some time before you actually see it on the shelves [plain packaging]. My expectation would be early next year," he said.
Action on Smoking and Health (ASH) director Stephanie Erick said the image glamourised smoking, and suggested Max could have used any number of different props - including a Bachelor-style rose - to make himself seem cool.
At Max's 21st birthday last month, held at the Keys' Parnell mansion, the Prime Minister requested that nobody smoke.
Max Key in a shoot for Remix Magazine. Photo / Monty Adams
