The 170-pound contest will take place on the final UFC Fight Night event of 2021. Thompson confirmed the news to ESPN and Muhammad confirmed it via social media. MMAJunkie.com first reported the pairing.
Thompson (16-5-1) will look to re-bolster his title resume following a decision loss to Gilbert Burns in his last appearance, in July. Prior to the loss, Thompson had won two in a row against Geoff Neal and Vicente Luque. He is still the UFC's No. 5 ranked welterweight, and is one of the few top challengers left who has not already fought defending champion Kamaru Usman.
Fighting out of Simpsonville, South Carolina, Thompson last fought for a championship at UFC 209 in 2017.
Muhammad (19-3) is looking to cap off a huge 2021. He is 2-0 this year, with wins over Dhiego Lima and Demian Maia. He fought Leon Edwards in the main event of a UFC Fight Night in March, but that bout was ruled no contest when Muhammad was unable to continue following an accidental eye poke.
The 33-year-old Muhammad is No. 9 in the UFC's official welterweight rankings.