Israel Folau has stunned Parramatta and the NRL, by announcing he'll play rugby union in Europe next season, to play rugby union in Europe.

Folau quit the AFL and Greater Western Sydney to play for the Eels, but he rejected their offer today.

The club's request to sign Folau above the salary cap was knocked back by the NRL.

"We're very keen to see a player like Israel come back he's obviously a talented individual and we want to see talented individuals playing our game," NRL interim CEO Shane Mattiske said.

Folau could have signed if the salary cap was increased for next year, but a stalemate continues after negotiations with leading players today.

Parramatta boss Ken Edwards said the complicated nature of Israel Folau's contract negotiations forced the club to ask the ARL Commission for permission to break the NRL salary cap.

On Monday, Edwards confirmed the Eels had put forward a radical proposal to the ARLC to allow them to spend $400,000 over the $5 million cap in 2013 in order to accommodate Folau.

Edwards reportedly met with ARLC Chairman John Grant on Friday to discuss the proposal, which would have averaged the club's expenditure on players out over the 2013 and 2014 seasons.

Under the proposal, the Eels would have had a salary cap of $5.4 million next season, and then one of $4.6 million the season after.

Folau quit his lucrative AFL contract with Greater Western Sydney on November 1.