Folau only made the move to union at the start of the southern hemisphere season but his rise to the international scene was widely expected and Gatland admits that he can understand why.
"He's going to pose a big threat. He's an incredibly talented footballer," said Gatland, after he named George North and Alex Cuthbert as his chosen widemen when selecting the Lions' Test team earlier today.
"We know what a quality player he is. One of the big threats is how good he is in the air. That's always been a massive strength for him. I'm pretty excited about the match up between him and George North - that's almost worth the fare in itself.
"We've spoken to a number of people who have worked with him closely and they've said he's naturally gifted, he's able to ride a tackle very well and he's got the ability, particularly from his league background, in terms of offloading and getting the ball away."
Folau has played most of his rugby at full back for the Waratahs this term but Qantas Wallabies head coach Robbie Deans has opted to start the experienced Berrick Barnes at the back and handed him the No14 shirt instead.
And while Gatland isn't hiding from the fact that the Lions will have to keep a close eye on Folau when the Wallabies have the ball, he admits he plans to ensure the 24-year-old is fully tested when possession is in the hands of the tourists.
"He's an absolutely outstanding athlete, but probably the hardest position on the field to defend is as a winger. There will be no doubt that he will receive some attention defensively to see how strong he is," added Gatland.
"The Australians have not been afraid in the past to move their players around defensively to different positions, so whether they do that with him or not, or whether he runs at full back on a few occasions, we're not sure.
"He's been very good for the Waratahs at 15. I think in the first game he was a little bit lost when he defended on the wing but he's had a bit of time since then, a bit of experience, and with him being in the camp for three weeks I'm sure they will have worked really hard with him defensively."
While Folau could have a huge impact on the opening Test in one way or another, one area of the game that seems certain to have a heavy influence on proceedings is the battle at the breakdown.
Gatland spoke to referee Chris Pollock yesterday and insists he was happy with the outcome of his discussions with his fellow New Zealander.
"Sam (Warburton) and I had a chat with the referee and we were very happy coming away from it. He's looking to allow both teams to try and get quick ball, and that's all we're asking for.
"I think the man next to me (Warburton) has done a pretty good job in the past playing against (Richie) McCaw and (David) Pocock, so I think it's going to be a good battle between the two sevens. The collisions are important, getting on the front foot, and if we can get some quick quality ball we think we've got the firepower to be able to play some good rugby.
"I said there wouldn't be much of a change from what we've been trying to achieve on tour the whole time - we've come here to show the Australian public that we can play rugby. We think we've played some great rugby so far and that will be our aim and ambition on Saturday."