The 24-year-old, who was born in Malaga to a Spanish mother and a Moroccan father, has only been capped once by the Spanish national team - scoring in a 4-0 friendly victory over Lithuania in June 2021.
Diaz had previously represented Spain from Under-17 to Under-21 level, making a total of 25 appearances and scoring five goals.
Although Diaz has dreamt of representing Spain at senior level, the attacker is said to have grown frustrated of waiting for a call-up from national team manager Luis de la Fuente.
According to The Athletic, Morocco have attempted to convince Diaz to play for them for the last five years, and the African nation have now managed to persuade the Real Madrid man to make the switch.
The report adds that the Spanish FA are yet to be formally notified of Diaz's decision to represent Morocco, while the Moroccan FA will be required to submit a request to FIFA to change the player's nationality.
Fouzi Lekjaa, the president of the Moroccan FA, as well as politicians from the country are said to have already visited Diaz to discuss his international future.
Despite making his aforementioned debut for Spain against Lithuania nearly three years ago, FIFA rules state that any player can switch their allegiance as long as they have made less than three senior appearances for one nation before the age of 21 and have not played for that country for at least three years.
According to ESPN, Diaz has been left disappointed by how the Royal Spanish Football Federation (RFEF) have dealt with his situation, considering that they have acted differently towards other players.
ESPN sources state that the RFEF pushed to persuade Barcelona prodigy Lamine Yamal to represent Spain instead of Morocco, and sent high-ranking officials to meet the teenager in 2022.
The RFEF believe they have treated every player the same, and manager De la Fuente has been left is somewhat surprised by Diaz's decision.
"Everyone is free to make their own decisions," De la Fuente told reporters on Monday as quoted by ESPN. "For me, there are three steps to be called up: firstly, that you are eligible, secondly that you want to play for the national team and thirdly that the coach selects you.
"I have not spoken with [Diaz]. I either call players up or not and the [players] do what they have to do. I worked with him a lot [with the Under-21s] and I hold him in high esteem and have a lot of respect for him."
Morocco, who have recently risen to 12th in the FIFA world rankings, reached the semi-finals of the World Cup for the first time in their history in 2022, before being knocked out in the last 16 of the Africa Cup of Nations last month.
It remains to be seen whether Morocco boss Walid Regragui will be able to call up Diaz later this month ahead of friendly fixtures against Angola and Mauritania.
Following a successful three-year loan spell an AC Milan, Diaz has since become a first-team regular at Real Madrid this season, scoring eight goals and providing four assists in 32 appearances.