During the luncheon in Los Angeles, Diaz, 42, took a seat at a table with Gwyneth Paltrow, where she was "casually and constantly twirling her ponytail, showing off the ring and often playing with it," says an eyewitness.
That evening, the couple had dinner with friends at Italian hot spot Madeo, in Beverly Hills, where the actress flaunted her ring, a source tells PEOPLE.
"They arrived together with Benji driving. Cameron showed off her new ring and was smiling," the source says. "They enjoyed dinner for several hours."
After spending time with Diaz's family in Florida in July, the couple took their relationship to the next level. Madden, 35, appears to have moved in with Diaz in her Beverly Hills house, another source tells People.
The two have also "talked about marriage," according to an entertainment source.
"For a girl who was happy being single, Cameron seems to have fallen in love," the source says. "She is really happy. The relationship is deep and she wants people to know it."
Madden appears equally smitten, and when asked about his romantic relationship in August, he told PEOPLE, "I'm really happy right now."
Reps for both stars have not commented.
With reporting by PERNILLA CEDENHEIM and LINDA MARX