Gracie, in an interview with MMAjunkie.com, said, "We agreed with the principles of it. Usually, we do four-fight deals, and they want a longer contract."
Diaz earned the title of No. 1 contender in the UFC's lightweight division by besting Jim Miller recently. He is 16-7 overall and 11-5 inside the Octagon.
Gracie believes the deal will be finished soon, and the plans are for Diaz to compete for the belt in December. Current UFC 155-pound champion Benson Henderson defends his title against Frankie Edgar this Saturday night at UFC 150: Henderson Vs. Edgar II.
"Best-case scenario would probably be it happening in December," Gracie said. But it depends."
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