John Mayer & Cameron Diaz's New York PDA
08/20/2007 AT 03:00 PM EDT
The pair, who were first spotted out together in the city last week, were "all over each other" and "super flirty" at the Bowery Hotel Friday night, an onlooker tells PEOPLE.
Mayer, 29, and Diaz, 34, who sat together on a couch in the back of the patio, "were laughing and talking a lot" as the waitress brought several rounds of drinks, says the source.
Last Tuesday, the pair were spotted having dessert at the French-Vietnamese restaurant Indochine. "It looked like a casual date," said a source. "She was giggly. She was laughing and seemed happy."
Asked if the newly-close pair are dating, a source close to Mayer tells PEOPLE, "Yes, it's definitely true."
Diaz, who is filming What Happens in Vegas... in New York, split from longtime boyfriend Justin Timberlake in January. Mayer ended his on-again, off-again relationship with Jessica Simpson in June.
Reps for both Diaz and Mayer had no comment.
Reporting by KC BAKER, LAURA HAHN, JULIE JORDAN, AARON PARSLEY and JEFFREY SLONIM