Prior to the UFC, Diaz competed mainly for World Extreme Cagefighting (WEC). In 2006, at WEC 24, he fought for the WEC Lightweight Championship against then-champion Hermes Franca, losing by submission in the second round. This was the last event held by WEC before it was acquired by Zuffa, LLC, then-parent company of the UFC.

Diaz faced Gray Maynard on January 11, 2010, in the main event at UFC Fight Night 20, a rematch from when the two met in the semi-finals of the TUF 5 lightweight tournament, which Diaz won. Diaz lost a controversial split decision to Maynard, as the former TUF winner was given the nod in the FightMetric reports, winning rounds two and three.

Diaz made his Welterweight debut on March 27, 2010, at UFC 111 against Miletich Fighting Systems product and striking specialist Rory Markham. At the weigh-ins, Markham weighed in at 177, whereas Diaz weighed in at the Welterweight limit of 171; the fight was changed to a catchweight fight. Diaz went on to win the fight by TKO in the first round.

After the win over Markham, Diaz stated he would compete in both weight classes. His next fight was again at Welterweight against former professional boxer Marcus Davis on August 28, 2010 at UFC 118. Diaz finished Davis after choking him unconscious with a guillotine choke submission in the final round; the bout earned Fight of the Night honors.

Diaz next faced South Korean fighter Dong Hyun Kim, on January 1, 2011, at UFC 125. Diaz lost the fight via unanimous decision.

Diaz fought Rory MacDonald on April 30, 2011, at UFC 129. Diaz was unable to mount much significant offense and lost via unanimous decision. Following the loss, Diaz stated that he would be moving back down to the lightweight division.

Diaz defeated former PRIDE Lightweight Champion Takanori Gomi on September 24, 2011, at UFC 135 via armbar submission in the first round. He earned Submission of the Night honors for his performance.

Diaz next faced Jim Miller on May 5, 2012, at UFC on Fox 3. Diaz outboxed Miller for the majority of the first two rounds, even dropping Miller with a straight left at the end of the first round. Near the end of round two, Miller shot in for a takedown, to which Diaz stuffed and countered with a rolling guillotine choke, forcing the tap at 4:09 of the second round. The submission won Diaz his fifth Submission of the Night bonus award. It was also the first time Miller had been stopped in his MMA career.

Diaz faced Benson Henderson on December 8, 2012, at UFC on Fox 5 in the main event for the UFC Lightweight Championship. Diaz lost the one-sided bout via unanimous decision. Three weeks prior to the championship bout, Diaz signed an eight-fight contract with UFC.

Diaz faced former Strikeforce Lightweight Champion Josh Thomson on April 20, 2013, at UFC on Fox 7. He lost the fight via TKO due to a head kick and punches, during which Nate’s brother, Nick Diaz physically threw a towel into the octagon, in an attempt to signal the referee to end the bout. On May 16, 2013, Diaz was suspended by the UFC for violating the UFC’s code of conduct by using a homophobic slur on his Twitter page. The UFC expressed their disappointment and suspended him; he was eventually suspended for 90 days and fined $20,000.

A rubber match with Gray Maynard took place on November 30, 2013 in the main event at The Ultimate Fighter 18 Finale. Diaz won via TKO in the first round. The stoppage earned him his first Knockout of the Night bonus.

On May 5, 2014, both Nate Diaz and fellow UFC fighter TJ Grant were removed from the UFC’s lightweight rankings after being deemed inactive by the UFC.

After over a year away from the sport, Diaz returned from his self-imposed hiatus and faced Rafael Dos Anjos on December 13, 2014 at UFC on Fox 13. Diaz missed weight, coming in at 160.6 pounds. He was given additional time to make the lightweight limit, and cut down to 155.2. However, he was still fined 20 percent of his purse, which went to Rafael dos Anjos. Diaz, who seemed unmotivated and annoyed for most of the fight, lost the one-sided fight via unanimous decision (30–26, 30–26, and 30–27).

Diaz was briefly linked to a welterweight bout with Matt Brown on July 11, 2015 at UFC 189. However, in mid-April, Brown announced that the pairing had been scrapped.

After sitting out again for over a year, Diaz returned to face Michael Johnson on December 19, 2015 at UFC on Fox 17. He won the fight by unanimous decision after putting forth an absolute boxing clinic over Johnson and went on to give one of the most infamous post-fight interviews in UFC history, where he called out Conor McGregor by saying “you’re taking everything I work for, motherfucker, and I’ma fight your fucking ass” on live broadcast television. Both participants were awarded Fight of the Night honors.

Diaz was set as a replacement to face Conor McGregor on March 5, 2016 at UFC 196, filling in for an injured Rafael dos Anjos. With Diaz only having eleven days notice, the fight took place at welterweight (170 lbs) due to lack of time to cut weight. Diaz won the fight via submission in the second round. This gave Diaz his ninth submission victory in the UFC, tied for the second-most all-time behind only Royce Gracie. Both fighters were awarded Fight of the Night honors and Diaz was also awarded with the Performance of the Night bonus.

After a two-year long layoff, it was announced on August 3, 2018, that Diaz was expected to return on November 3 against Dustin Poirier in a lightweight bout. This bout was expected to serve as the co-headliner of UFC 230. However, on October 9, 2018, it was announced that Poirier pulled out due to injury and as a result the bout was canceled.

Diaz’s brother Nick Diaz is also a professional MMA fighter fighting under UFC. Both Diaz brothers are advocates for cannabis and even have a licensed line of marijuana pre-rolls made by California Finest. They currently run a Brazilian jiu-jitsu school in Stockton, California, Nick Diaz Academy and founded a CBD company Game Up Nutrition. He has been primarily vegan since he was 18, but admits to eating fish from time to time. On June 20, 2018, it was announced that Diaz’s girlfriend had given birth to their daughter.

Diaz faced Jorge Masvidal on November 2, 2019 in the main event of UFC 244. In a unique situation, UFC President Dana White confirmed that the headlining bout was for a celebratory “baddest motherfucker” (‘BMF’) belt. Masvidal won the fight via technical knockout via doctor stoppage between rounds three and four when the cage-side physician determined a cut over Diaz’s right eye rendered him unable to continue.