The Waratahs ended their five match losing streak against the Reds with a 32-5 bonus point victory at ANZ in Sydney on Saturday.
The Templeton Cup victory is the Waratahs first over the Queensland Reds since February 2011.
The result puts the Waratahs provisionally on top of the Super Rugby standings and they can only be overtaken by the Lions should they beat the Bulls later in the round.
The 26-point margin eclipsed the Tahs' previous highest winning margin over the Reds of 24 in their 30-6 win three years ago.
It was a dominant performance by the Waratahs upsetting the Reds with rugged uncompromising defence and moving the ball quickly from the rucks.
They held a 19-5 half-time lead and kept the Reds scoreless in the second-half to remain unbeaten with two wins this season under coach Michael Cheika.
Folau had an eventful match, scoring his two tries in the opening 25 minutes before being yellow-carded for intentionally knocking the ball into touch to prevent Reds winger Dom Shipperley from scoring nearing halftime.
Queensland's only points came seconds later when former Tahs' winger Lachie Turner crossed wide out against the undermanned Waratah defence.
The Waratahs clinched the match seven minutes after half-time when Wallaby back Kurtley Beale scored off a quick free kick close to the Queensland line.
"We had our forwards doing the hard work and then our backs looked fantastic," Waratahs skipper Michael Hooper said. "We played our game in the wet conditions and it paid off.
"We are starting to get confidence in our ability to attack from anywhere and we can build of this confidence."
The Waratah forwards dominated the Reds pack, with South African hard man Jacques Potgieter prominent in the heavy exchanges before making way for Will Skelton just after half-time.
Nick Phipps and Bernard Foley won the battle of the halves over Wallaby pair Will Genia and Quade Cooper, with Foley finishing with three conversions and two penalties and Cooper missing his only kick at goal.
"We didn't put them under any pressure and we didn't play any field position so we put ourselves under a lot of pressure," Reds captain James Horwill said.
"We made too many mistakes and the Waratahs were very good on counter-attack and were able to convert their opportunities.
"We have plenty to work on and we have six days before we play the Cheetahs at home."
The Waratahs will have a bye next weekend before looking to remain unbeaten against the ACT Brumbies in Canberra on March 15.
Final Score Waratahs 32 (19) Reds 5 (5)
Tries - I.Folau 2, P.Betham, K.Beale
Pen - B.Foley 2
Con - B.Foley 3
Cards - I.Folau (38th min yellow)
Tries - L.Turner
Referee: Glen Jackson
Assistant Ref 1:James Leckie
Assistant Ref 2:Will Houston
1. Benn Robinson , 2. Tatafu Polota Nau , 3. Paddy Ryan , 4. Jacques Potgieter , 5. Kane Douglas , 6. Stephen Hoiles , 7. Michael Hooper (c) , 8. Wycliff Palu , 9. Nick Phipps , 10. Bernard Foley , 11. Peter Betham , 12. Kurtley Beale , 13. Adam Ashley-Cooper , 14. Alofa Alofa , 15. Israel Folau ,
Replacements from 16. Tola Latu , 17. Jeremy Tilse , 18. Sekope Kepu , 19. Will Skelton , 20. Pat McCutcheon , 21. Brendan McKibbin , 22. Rob Horne , 23. Matt Carraro , 24. Jonno Lance
1. James Slipper , 2. Saia Fainga'a , 3. Greg Holmes , 4. Rob Simmons , 5. James Horwill (C) , 6. Eddie Quirk , 7. Liam Gill , 8. Jake Schatz , 9. Will Genia (VC) , 10. Quade Cooper , 11. Dom Shipperley , 12. Anthony Fainga'a , 13. Ben Tapuai , 14. Lachie Turner , 15. Aidan Toua
Replacements : 16. James Hanson , 17. Ben Daley , 18. Jono Owen , 19. Ed O'Donoghue , 20. Beau Robinson , 21. Nick Frisby , 22. Ben Lucas , 23. Chris Feauai-Sautia