Wallabies fullback Israel Folau.
After the meeting, Castle told reporters Rugby Australia has agreed to continue its dialogue with Falau, but the player gave no firm commitment he'll stop posting anti-gay comments.
Last week the Waratahs back - a devout Christian - was heavily criticised for suggesting that gay people would be sent to "HELL" unless they "repent".
"We are in a negotiation with Israel to extend [his contract] and we would really like him to stay in rugby, that's hugely important to us, he is a great player, he has delivered some great outcomes for us and has been a really strong role model in the Pacific Islander community and we would like to see he stays in rugby", Castle said.
"We're proud of the fact that he's a strong believer and he's prepared to stand up for what he believes in".
Rugby Australia (RA) boss Raelene Castle and the NSW Waratahs chief Andrew Hore are set to meet Folau on Tuesday over his use of social media, which he uses to proclaim his position on same sex marriage and homosexuality - a position in direct contrast to that of major corporate sponsor Qantas.
Off contract at the end of the year, three-times John Eales Medallist Folau has seemingly contravened RA's inclusion policy.
His comments were described as "very disappointing" by Qantas airlines, a major sponsor of Rugby Australia, while global referee Nigel Owens, who came out as gay in 2007, said such comments could contribute to young people taking their own lives.
Over the weekend, Folau stoked even more controversy by tweeting a Bible verse that painted him as the victim in the situation.
Castle declined to clarify whether the 29-year-old had breached any RA rules over conduct or social media use, or whether he would incur any penalties for further inflammatory posts.
Owens, writing in his column with Wales Online, said he had once counselled a suicidal young rugby player and that Folau's remarks could potentially tip some people over the edge.
"As a sponsor of Rugby Australia, we're supportive of their approach towards tolerance and inclusion, which aligns with our own", they said.
"This is not a simple issue", she said.
"We certainly will be putting our best foot forward to make sure he stays in rugby".
"When you try and bring all those things together, that's a very hard place for this to be, and interestingly, I know there'll be a lot of other sports out there looking to see how this plays out, to see how we work though this particular issue".