UFC welterweight champion Tyron Woodley would "bet the house" on his next opponent being Nate Diaz, confirming talks over a possible showdown in July are already well underway.

Diaz has not been seen inside the octagon since his bloody battle with Conor McGregor at UFC 202 in August 2016, where he lost on a majority decision after a brutal five rounds with the Dubliner.

The Stockton-born fighter has teased the possibility of a return in recent times, insisting he was "sick of sitting around" in an Instagram post in January where he talked up the possibility of a return "around May [or] June."

UFC 226 is scheduled for July and speaking in an interview with ESPN, Woodley suggested a meeting with Diaz is now a definite possibility.

"I think that fight will happen," Woodley said. "I think it will happen this year. I think it is way more likely than people realise.

"There are conversations about Nate and I fighting in July. The UFC has offered Nate that fight. They just have to make it worth his while.

"I think I'll fight Nate this year and I think it will be my return to the octagon. If I had to bet the house on it, that's my next opponent."

Woodley suffered a muscle tear in his welterweight title defence against Demian Maia last July and underwent shoulder surgery in December. The 35-year-old anticipates his meeting with Diaz would be with his belt on the line again but adds he is willing to consider different scenarios if it stands to benefit his career.

"If we are fighting, I am pretty sure it would have to be for my belt," he continued. "Now, if they want me to fight him at a catch-weight, not a title fight, I am gonna have to drop to my knees and make a prayer to the most high for something like that.

"At this point in my career, if it is a fight that is not for my belt, I am willing to step out of the box and do some different things."