The 25-year-old has not played since surgery on a dislocated shoulder he suffered in the Six Nations in March and he is now out with a groin injury.
Last week Toulon president Mourad Boudjellal said the player's contract could be terminated on medical grounds.
But it is understood that the rift has now been healed after urgent talks.
Halfpenny joined French Top 14 side Toulon from Cardiff Blues on a two-year deal in the summer and he has yet to play for the Heineken Cup winners because of the groin injury.
But Halfpenny is back running in training and sources close to the player believe he could return to action within three weeks.
Boudjellal told French newspaper Varmartin at the time that he felt Halfpenny might have been carrying the groin injury when he arrived at Toulon.
The Toulon president had said: "We haven't excluded denouncing his contract."
That put Halfpenny's former side Cardiff Blues and their regional rivals Ospreys on alert that the 2013 British and Irish Lions player of the series might become available.
Any move back to Wales would likely have been on a dual contract partly funded by the Welsh Rugby Union.
But it seems that Halfpenny's immediate future in France is now secure and he will soon take his place in a side still in need of a top-level goal-kicker following the retirement of Jonny Wilkinson.
Toulon returned to form on Friday with a 53-13 win over Brive that took them top of the table - at least until other sides play on Saturday - with Halfpenny tweeting his support for his team-mates ahead of the game.
"Good luck to the @RCTofficiel lads playing against Brive tonight," he wrote, before retweeting the same message in French.
Leigh Halfpenny's future at Toulon appears to have been resolved following a meeting between the Wales full-back's representative and club officials.