Israel Folau's contract has been terminated by Rugby Australia after he said "hell awaits" gay people in a social media post.
The full-back, 30, was sacked in April but requested a hearing, which was heard by a three-person panel.
The panel found him guilty of a "high level breach" of RA's player code of conduct and upheld the dismissal.
Folau, who had a RA deal until 2022, has 72 hours to appeal against the ruling and is considering his options.
An appeal would mean a second code of conduct hearing with the same evidence but a new panel, while he could also try to take his case to a regional Supreme Court, or even the High Court of Australia.
The fundamentalist Christian posted a banner on his Instagram account in April that read: "Drunks, homosexuals, adulterers, liars, fornicators, thieves, atheists and idolators - Hell awaits you."
New South Wales Waratahs' Folau, who escaped punishment for similar comments last year, said he was "deeply saddened" by RA's decision.
"It has been a privilege and an honour to represent Australia and my home state of New South Wales, playing the game I love," he said in a statement.
"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."
Folau, RA chief executive Raelene Castle, Wallabies coach Michael Cheika and New South Wales Rugby Union (NSWRU) chief executive Andrew Hore all gave evidence at the three-day hearing earlier this month.
The panel then took written submissions before deciding on Folau's punishment.
"This outcome is a painful situation for the game," said Castle.
"Rugby Australia did not choose to be in the situation, but Rugby Australia's position remains that Israel, through his actions, left us with no choice but to pursue the course of action resulting in today's outcome."
Folau was expected to play at this year's World Cup in Japan but Cheika has said he is unlikely to be selected for Australia again.
"This issue has created an unwanted distraction in an important year for the sport and for the Wallabies team," added Castle.
"But our clear message for all rugby fans is that we need to stand by our values and the qualities of inclusion, passion, integrity, discipline, respect and teamwork."
NSWRU boss Hore said: "While NSWRU is disappointed to lose a player of Israel's calibre, rugby has a code of conduct and values that we must adhere to ensure that our game remains a game for all, no matter people's background or beliefs."
In addition to his rugby union career, Folau has also played professional rugby league and Australian rules football.
In April, Australian rugby league's governing body ruled out Folau returning to the NRL.
He has recently lost sponsorship deals with Land Rover, who withdrew a car issued to him, and sportswear brand Asics.
Rugby Australia is a foundation member of Pride in Sport Index (PSI), which is a programme in Australia set up to help sporting organisations with the inclusion of the lesbian, gay, bisexual, transgender and intersex community.
"We commend Rugby Australia, as well as New South Wales Rugby Union, for their leadership and courage throughout this process," said PSI co-founder Andrew Purchas.
"Their swift and decisive actions shows that homophobic and transphobic discrimination is not acceptable in sport and individuals - irrespective of their social or professional stature - will be held accountable for their words and actions."