According to reports Down Under, the dual-international has signed a two-year contract with the Waratahs and is waiting to confirm final details with the Australian Rugby Union.
Folau, who made his name in rugby league before a brief and unsuccessful spell in AFL, made a sensational international debut against the British & Irish Lions last month.
He became the 867th Wallaby when former head coach Robbie Deans handed him his first cap against the Lions.
Folau scorched clear for two scintillating try in the first Test in Brisbane but it was not enough for the hosts as the Lions held on for a 23-21 victory.
He remained a danger man for the Wallabies but was well marshaled by George North and limped out of the third Test as the Lions roared to a first series victory in 16 years.
He had been linked to a return to NRL after bring spotted in the company of Canterbury officials at the State of Origin decider and training in Manly.