The Australian full-back, who holds a traditional Christian understanding of the issue, replied to a question on Instagram which asked what God's plan was for gay people.
He replied: "HELL...Unless they repent of their sins and turn to God."
Despite deleting the post, an image of his comment has been shared online thousands of times.
"Israel's comment reflects his personal religious beliefs, however it does not represent the view of Rugby Australia or NSW Rugby," Rugby Australia chief executive Raelene Castle said in a statement.
"We are aligned in our view that rugby is a game for all, regardless of sexuality, race, religion or gender, which is clearly articulated in rugby's inclusion policy.
"We understand that Israel's comment has upset a number of people and we will discuss the matter with him as soon as possible."
Twenty-nine-year-old Folau has made 62 appearances for Australia, having initially started out as a rugby league player.
Despite receiving widespread criticism, Folau has been given support from his fellow players.
In an interview with Fox Sports' Kick & Chase, Nick Phipps who plays with him for Australia and the Warratahs said: "We're a super diverse group, everyone has got their own different views and beliefs and Iz is a very Christian man."
"It's certainly not something that, as a club or as the rest of the squad, we share, but for him that's just his beliefs at the moment and we've got to support that and it's not a big deal for the squad moving forward."
Folau also received backlash when he publically stated that he wouldn't support the legalisation of gay marriage in Australia's referendum on the issue last year.
At the time, he said: "I love and respect all people for who they are and their opinions but personally I will not support gay marriage."
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