Although engagement rumors began back in October when Diaz wore the ring to the Hollywood Costume Luncheon, they heated up this month; a friend of Madden reportedly told People the proposal is new.
"It happened a few nights ago. All of Benji's friends are aware and happy for him," said the source, adding that Diaz's mother "is a fan" of Madden's and "gave her blessing."
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In a recent cover story for 'Cosmopolitan', the "Annie" star discussed at length the makings of a good relationship -- without ever mentioning her beau explicitly.
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"Timing is everything," she told the magazine. "If you get into a relationship where you want something the guy doesn't want, it's never gonna work. You're never going to get him to be in that place. No matter how old you are, finding the guy who's in the same place as you are and wants to show up is the only way a relationship works, period."
Diaz, 42, and Madden, 35, began dating in the spring after being introduced by Nicole Richie, who is married to Madden's twin brother, Joel.