Californian beauty queen Carrie Prejean has dropped her lawsuit against the Miss USA pageant after organisers found a hardcore homemade sex tape in which she is the star, TMZ reports.

PHOTOS: Celebrity sex tape scandals

The 22-year-old blonde stunner sued the pageant in August for libel, slander and religious discrimination, claiming they had asked her to stop talking about God at public events.

But Prejean withdrew her demands overnight after the graphic porn tape was discovered by pageant officials.

TMZ said it took Prejean 15 seconds to accept a $100,000 payout which covers the costs of her lawyers — but leaves nothing for her.

The website said the video was so racy that not even they would publish it.

It is not known what Prejean was doing on the tape although TMZ reported the star had a "promising solo career".

Prejean's Miss California crown was relinquished in June this year amid accusations she kept missing events.

Her sacking also followed controversial remarks she made about gay marriage during the Miss USA pageant.

The pageant countersued Prejean earlier this month over $5720 it gave her for breast implants.

Organisers said Prejean asked for the implants so she could "be more competitive" at the Miss USA events.

A joint statement said Prejean and the pageant wished "each other the best in their future endeavours."

The next Miss USA will be crowned on November 22.

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