Rugby Australia on Monday served the Test and NSW Waratahs back with a breach notice over his posts on social media platforms last week.
The religiously-motivated Folau attracted a fresh storm of controversy when he posted on Instagram: "Warning".
"Isreal has responded formally today to request a Code of Conduct hearing which, under the circumstances, was not an unexpected outcome".
'At its core, this is an issue of the responsibilities an employee owes to their employer and the commitments they make to their employer to abide by their employer's policies and procedures and adhere to their employer's value, ' she said.
"Israel has failed to understand that the expectation of him as a Rugby Australia and NSW Waratahs employee is that he can not share material on social media that condemns, vilifies or discriminates against people on the basis of their sexuality".
Rugby Australia bungled its contract negotiations with Israel Folau by failing to insert social media restraints, according to a Sydney media report.
The Wallabies full-back was warned a year ago for making homophobic comments on social media, but escaped disciplinary action.
The fundamentalist Christian posted similar comments past year but escaped sanction and signed a new deal with RA through 2022 in February.
Folau says he's doing God's will.
'When you play in the gold jersey we represent everyone in Australia, everyone.
Beaten in the 2015 World Cup final by New Zealand, Australia are coming off their worst season in decades and have fallen to number six in the world, with few giving them much chance of lifting the silverware in Japan.
Seemingly at the 11 hour, Folau has responded and will take the matter further.
The 30-year-old devout Christian said on his Instagram account last week that "hell awaits" for "drunks, homosexuals, adulterers, liars, fornicators, thieves, atheists, idolators".
"I told Raelene, if she felt the situation had become untenable - that I was hurting Rugby Australia, its sponsors and the Australian rugby community to such a degree that things couldn't be worked through, I would walk away from my contract, immediately", Folau wrote previous year.
Widely considered one of the game's best players, Folau is Super Rugby's all-time leading try scorer.
Those that are living in Sin will end up in Hell unless you repent.
The same day, he linked on Twitter a story about Tasmania allowing those ages 16 and over to change their birth certificates or to remove gender from the certificates altogether.