The sacked Wallaby and his netballer wife Maria Folau went to the Federal Court in Melbourne on Monday for a mediation meeting over his $14 million compensation claim against Rugby Australia.
Folau claims he was wrongfully dismissed by Rugby Australia and Rugby NSW after a controversial Instagram post in April condemning "drunks" and "homosexuals" and warning "hell awaits" them.
His lawyer George Haro told reporters in Melbourne late on Monday evening they weren't able to reach an "amicable solution just yet.
"However, where we stand is that mediation remains on foot and are hopeful to reach one on the coming days," he said.
The former rugby league and AFL player last week increased his compensation claim from $10 million to $14 million, and said the Wallabies would have done better in the 2019 Rugby World Cup if he was playing.
"I understand that not everyone shares my faith and some find it difficult to reconcile with their own beliefs," Folau said in a video posted on his website before the meeting.
"I want to be clear that I only share passages from the Bible as a gesture of love.
"We pray that we might all find redemption and peace in the words of the Lord Jesus Christ as we head to today's mediation, we also ask that He watches over us, so that both parties might realise the courage to uphold the truth."
But Ms Castle said she had been sent messages and emails from the rugby community supporting the decision to sack Folau.
"That leaves us in no doubt that we are doing what's right. Israel's commentary subsequent to his termination has only reinforced this belief," she told reporters outside court in Melbourne, earlier on Monday.
"Israel admitted he had caused harm with his comments and stated that he would not curb his social media use and will post whatever he likes whenever he feels the need to share his views."
Ms Castle said a tribunal found Folau had committed a high level breach of his contract and he had refused to curb his social media use.
"Rugby Australia is confident in its legal position but we come here today with a genuine desire to find a settlement that is sensible and reasonable so that we can return all our focus and resources to growing the game of rugby across Australia," she said.
Folau is a hardline Christian who also recently claimed fatal bushfires were God's punishment for legalising abortion and same-sex marriage, sparking criticism from Prime Minister Scott Morrison.