Rugby Australia insisted Thursday it did not back down by settling its feud with Israel Folau over homophobic comments while all-but ruling out the staunch Christian playing Super Rugby again.

The two parties avoided a costly court battle by reaching a mediated agreement on Wednesday to end Folau's lawsuit over his sacking in May for warning "hell awaits" gay people and others he considers sinners.

Under the settlement, both sides apologised for "any hurt or harm" caused, with Folau taking to YouTube to claim he had been "vindicated". Financial terms of the deal were confidential.

But Rugby Australia chief Raelene Castle said the governing body "didn't back down" and that it stood by its decision to terminate him.

"We had to make a decision that was right for rugby in this country," she said at a press conference in Sydney.

"We made the right decision in calling out Israel on his posts and his inappropriate messaging," she added.

"That remains the same, we stick to our values that inclusiveness is absolutely core to rugby."

She said taking the matter to court was not in the interests of the game, which is already struggling with poor crowds and a woeful performance by the Wallabies at the World Cup in Japan this year.

- 'Positive way' -

"So we made a decision that gave us cost certainty that put us in the best financial decision entering the new year in a positive way," Castle said.

Folau had been demanding Aus$14 million (US$9.5 million) in compensation, claiming he was unlawfully dismissed under legislation that bans sacking someone because of their religion.

Rugby Australia argued the termination for "high-level" misconduct was purely contractual.

Sydney's Daily Telegraph reported that the settlement was worth Aus$8 million, but Castle shot that down as "wildly inaccurate".

She would not reveal how much it amounted to, although the governing body has an insurance policy for such a scenario.

Castle made clear Folau would not be playing Super Rugby again, effectively ending his Wallabies career.

"At the end of the day, we have parted ways. He's been terminated since April," she said when asked if he could play for an Australian club in the southern hemisphere tournament under the settlement.

"Never say never, because that would be crazy," she said when pressed by reporters on the issue.

"I think its clear to see our values are not aligned and the expectations that Rugby Australia would have of Israel coming back into the sport would not be acceptable."

Folau played 73 Tests for the Wallabies and was Super Rugby's record try-scorer for the NSW Waratahs before his four-year, Aus$4 million contract was terminated.

Australia's National Rugby League has previously said it would not welcome him back to the 13-man code he played at the start of his career, although a move to rugby union overseas remains a possibility.

An attempt to join Tonga's national rugby league team in September faltered amid in-fighting among officials, and Folau has recently focused on his legal battle and preaching at the Sydney church where he worships.