His wife Leigh and daughter Michaela were accosted near the All Blacks' hotel in the French capital around the time of New Zealand's opening game against hosts France in September, he said.
Foster had not mentioned the incident during the tournament won by South Africa, who beat New Zealand 12-11 in the final.
"There was an incident involving my wife and one of my daughters in Paris during the opening week of the Rugby World Cup," said Foster, who was replaced as All Blacks boss by Scott Robertson following the tournament.
"Leigh and Michaela were walking to our team hotel from a nearby train station in the early evening when they were confronted by a young man with a knife," he said in a statement.
"The man appeared to be under the influence of something."
Foster said his family were able to defuse the situation "calmly but firmly and the man left".
The All Blacks' security team and the local authorities were later informed, he added.
"As a family we would like to reiterate that this did not in any way take away from our time in France which was positive overall," Foster said.
His daughter was in France supporting her father after playing for the New Zealand women's football team at the FIFA World Cup on home soil.