Papalii and the Raiders announced late on Friday afternoon that the forward had agreed to a new three-year deal to stay in Canberra.
The Eels were quick to issue a statement declaring their disappointment in the decision, claiming Papalii had turned his back on both written and verbal agreements to join Parramatta for the 2014 season onwards.
"The Pirtek Parramatta Eels today received notification from the management of Josh Papalii that despite signing a three-year contract with the club commencing in 2014, he will remain at the Canberra Raiders," the Eels said.
"The Pirtek Parramatta Eels conducted negotiations with Josh Papalii and his management with upmost integrity and professionalism."
Parramatta chief executive Ken Edwards expressed his anger in the statement.
“To say we are disappointed by Josh’s decision to not see through his verbal and written agreements to join the Pirtek Parramatta Eels next season is an understatement," Edwards said.
"We are building something special here and we are only interested in people who are strong and committed joining this organisation.”