The video obtained by celebrity website TMZ was said to have been shot days after Cyrus's 18th birthday in November.
It shows the star of Disney Channel's "Hannah Montana" giggling and laughing after smoking from a glass pipe, commonly called a bong. TMZ said sources close to Cyrus told the website that the video was shot by one of Cyrus's friends, but the substance was not marijuana.
"Is that me tripping!?", Cyrus exclaims in the video, after using the bong and mistaking another person at the party for her ex-boyfriend, actor Liam Hemsworth
The herb salvia divinorum has hallucinogenic properties but is not illegal in California. According to a 2007 U.S. survey on drug use and health, about one million people had used it that year.
The singer's father, Billy Ray Cyrus, said on Friday he was saddened at the video, which quickly made headlines around the world.
"Sorry guys. I had no idea. Just saw this stuff for the first time myself. I'm so sad. There is much beyond my control right now," Cyrus said in a Twitter posting. Cyrus and his wife Tish announced in October that they were divorcing.
Representatives for Cyrus did not return requests for comment on Friday.
Miley Cyrus has sought this year to distance herself from the "Hannah Montana" character she began portraying in 2006, winning millions of young fans.
She played a rebellious teen in romantic movie "The Last Song", stepped out publicly with Hemsworth, and made two raunchy pop music videos.
The new image has dismayed parents of some of the younger fans of "Hannah Montana", whose final episode does not air until the spring of 2011.
The video even caused one betting site, bookmaker, to place odds on what might next be revealed about Cyrus. Examples included whether she might attend rehab, or be dropped by her record label.