Rugby Australia confirmed that Folau had been sacked after a hearing, the 30 year-old found to have committed a "high-level breach" of the governing body's Code of Conduct after a social media post in which he wrote that "hell awaits" homosexuals.
Waratahs full-back Folau, who has 73 international caps for the Wallabies and had a Rugby Australia contract until 2022, has 72 hours to appeal.
A statement attributed to Folau released to the Australian media read: "It has been a privilege and an honour to represent Australia and my home state of New South Wales, playing the game I love.
"I am deeply saddened by today's decision to terminate my employment and I am considering my options.
"As Australians, we are born with certain rights, including the right to freedom of religion and the right to freedom of expression. The Christian faith has always been a part of my life and I believe it is my duty as a Christian to share God's word.
"Upholding my religious beliefs should not prevent my ability to work or play for my club and country.
"I would like to thank my wife Maria for her love and encouragement to stay true to our beliefs. We have been humbled by the support we have received from family, friends, players, fans and the wider community.
"Thank you also to those who have spoken out in my defence, some of whom do not share my beliefs but have defended my right to express them."