Israel Folau's career appears over after a three-person panel upheld the decision from Rugby Australia to sack the player for his "Hell awaits" comment about homosexuals on social media.
The 30-year-old appealed after he had his contract terminated by the national governing body in April.
The three-member panel which heard the case found him guilty of a "high level breach" of Rugby Australia's player code of conduct.
Folau, whose contract was worth a reported AUS$4 million (£2.1 million/$2.8 million/€2.5 million), is thought to be considering another appeal and has 72 hours to decide.
The same three-member group, comprising John West, Rugby Australia representative Kate Eastman and John Boultbee from the Rugby Union Players' Association, could be asked to hear the evidence again should Folau contest their decision.
He could also launch an appeal at Australia's Supreme Court.
In a statement, Folau, who has made 62 appearances for Australia and was set to be one of the key members of the squad at this year's World Cup, said he was "saddened" by the ruling.
"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.
"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."
His contract was terminated after he posted "Drunks, homosexuals, adulterers, liars, fornicators, thieves, atheists and idolators – Hell awaits you" on Instagram in April.