Depends on which stage of the RNA isolation you are referring to. Are you talking about the solubilisation of the isolated RNA pellet? Or are referring to an additional dilution of the RNA pellet. If you are using silica columns, are you referring to the elution step? In all these cases, what you are using is not (or at least should not) be merely "nuclease" free water, but specifically, RNase-free water (although making sure other nucleases aren't there is also good as well). Water is used because it maintains the stability of RNA better than some typical buffers, which could contain inadvertent RNases from the components used to make them. Autoclaving rarely disposes of RNases. Another common medium for RNA isolates is DEPC treated water which deactivates most RNases that come in contact with it (most of the time). The point is to prevent your RNA from being exposed to RNase. RNases are everywhere, falling off your skin, covering your benchtop, catapulted through the air etc. All of them active and ready to degrade your precious RNA. RNase-free water is simply a safe bet.

Nuclease free water is also essential in  inactivating RNASes in buffers, glass or plastic wears used in RNA isolation.

Alternatively, one can use 0.1% DEPC, which is an inhibitor of RNases, although not entirely absolute. DEPC destroys RNases enzyme activity by modifying amino, sulfhydryl and hydroxyl groups in RNases and any contaminant protein that could be present in the final precipitate after extraction.

Dear Manikanta,

Nucleases degrade RNA. Thus, if you are isolating RNA you wouldn't want it degraded and hence you should use nuclease free water always.