Ex-Wallabies star Folau had asked for public donations in his legal battle against Rugby Australia (RA) having had his contract terminated by the governing body last month, following a social media post in which he said homosexuals were destined for hell unless they repented their sins.
Folau, who had previously been warned about similar posts, received more than 700,000 Australian dollars in donations on GoFundMe, but the crowdfunding platform shut down his page and refunded all donors on Monday, explaining that "this campaign violates our terms of service" in a statement.
"As a company, we are absolutely committed to the fight for equality for LGBTIQ people and fostering an environment of inclusivity," GoFundMe's Australia regional manager Nicola Britton said.
"While we welcome GoFundMe's engaging in diverse civil debate, we do not tolerate the promotion of discrimination or exclusion."
A spokesperson for Folau then issued a statement calling GoFundMe's decision "very disappointing" and revealing that other organisations had pledged to support the 30-year-old's legal fight.
"The decision of GoFundMe to cancel Israel's fundraising campaign to support his legal action fund is very disappointing," the spokesperson said.
"The fundraising campaign was in line with GoFundMe's terms and conditions as well as all relevant rules and regulations. Unfortunately, GoFundMe has buckled to demands against the freedom of Australians to donate to his cause.
"There appears to be a continuing campaign of discrimination against Israel and his supporters. Israel Folau is very grateful to the 10,000-plus supporters who believed in good faith that their donations would contribute to his case against Rugby Australia.
"Since requesting public donations to help him with his legal action against Rugby Australia, Israel and his supporters have come under intense scrutiny in the media.
"Further, Israel's website has been the target of what we believe was a sustained cyberattack and there has been a deliberate attempt to vilify his wife Maria for supporting her husband.
"While Israel does not intend to respond in detail at this time regarding the accusations thrown at him or his family, he wants it known that these attacks have hardened his resolve.
"Thankfully, several organisations have already expressed interest in supporting Israel's efforts to raise money for his ongoing legal case."
Folau was sacked by RA having been found to have committed a high-level breach of its professional players' code of conduct.
The dual-code international claims he is being denied freedom of religion.