Cameron Diaz and Benji Madden have sparked rumours they're engaged.

The 'Other Woman' actress, who started dating the Good Charlotte rocker earlier this year, was spotted showing off a sparkling new ring on her engagement finger at the Academy's Hollywood Costume luncheon on Wednesday (08.10.14), which she attended with best pal Gwyneth Paltrow.

An eyewitness told PEOPLE.com that the 42-year-old star was ''casually and constantly twirling her ponytail, showing off the ring and often playing with it.''

The blonde beauty later joined Benji, 35, and a small number of friends for dinner at Italian hot spot Madeo in Beverly Hills.

A source said: ''They arrived together with Benji driving. Cameron showed off her new ring and was smiling. They enjoyed dinner for several hours.''

Another insider revealed the 'We Are Done' hitmaker moved into Cameron's house in Beverly Hills after she introduced him to her family in Florida in July.

The source added: ''Since she started dating Benji, Cameron has changed in a very positive way. She can't stop smiling and seems much happier.

''Benji has lived with Cameron for the past couple of months. They act like they can't get enough of each other and spend a lot of time together. During the days, they often share a workout. At night, they often stay at home and cook.

''For a girl who was happy being single, Cameron seems to have fallen in love. She is really happy. The relationship is deep and she wants people to know it.''

Representatives for the couple declined to comment on the engagement rumours.