The iconic number, which has also been worn by club legends, Raul and Emilio Butragueno, remains vacant following Ronaldo’s move to Juventus.
Ronaldo left Madrid as their all-time highest goalscorer to join the Italian giants earlier this summer in a 100-million-euro deal.
According to Spanish radio station, Cadena COPE, the Champions League holders have reserved the No.7 shirt for Diaz.
The report claimed that Madrid also has the shirt numbers 15, 16 and 23 still available.
Diaz will be officially presented to Madrid’s fans at the Santiago Bernabeu on Friday.