UFC president Dana White announced the fight on UFC Tonight. The pay-per-view event, which previously was expected to take place in Las Vegas, has moved to Sleep Train Arena in Sacramento.
Dillashaw (10-2) claimed the 135-pound title in shocking fashion at UFC 173 in May. The 28-year-old knocked Barao down in the first round and eventually went on to finish the fight via TKO in the fifth.
A member of Team Alpha Male in Sacramento, Dillashaw is 6-2 in the UFC. His most recent loss came via split decision to Raphael Assuncao in October. That fight took place in Brazil.
Prior to UFC 173, Barao (32-2) had not suffered a professional loss since April 2005. The Brazilian bantamweight is 7-1 in the UFC, including finishes over Urijah Faber, Eddie Wineland and Michael McDonald.