Larkham has undergone a second knee operation this week and is facing a desperate race against time to be fit for the knockout stages of the World Cup.
With his retirement from international rugby to come at the end of the Wallabies' final game of the tournament, pulling on the green and gold once again is becoming less likely.
"There's a chance that he may not play, that's something that we've got to be aware of," Foley said.
"I think the thing to understand is that with the infection there's been a clean-out of the knee and that creates irritation.
"It's all about how quickly that settles down, so we'll know a little bit more early next week but very much there's a chance that he may not play in the tournament again."
Full-back Latham has his fingers crossed that he will combine with Larkham at least once more.
The 33-year-old played in the opening match against Japan three weeks ago but was then forced under the knife when his knee locked up at training on the eve of the game against Wales a week later.
Larkham then suffered a setback earlier this week when he was hospitalised again after an infection set in at the site of the first operation.
Latham said: "I saw him coming in this morning obviously looking a bit drained and tired as you do when you come out of hospital but hopefully, fingers crossed for the team's point of view and, probably from a selfish point of view of my own, I hope that he makes a pretty quick recovery and we can get him back playing some games.
"Not only is he a very important part of the squad for this campaign but I think, on a personal note, I'd hate for his career with Australian rugby to end as it has, as it might as it sits at the moment.
"It'd be nice to see him come back, play some footy in the World Cup and I think get what he deserves and that's a farewell final, him playing in it and winning it."