Díaz began his career in Universidad de Chile youth academy, being immediately accepted by Jorge Cabrera, then coach of the club’s lower divisions. He played in the Club Julio Covarrubias of Padre Hurtado before arriving to Universidad de Chile, with Díaz saying that he felt kind of lucky for being accepted in the club, because he was a very low profile player. He progressed over all categories in the lower divisions, mainly acting as a playmaker. He was promoted to the first team in 2004 at the age of 18, but he was only called to three matches and not debuted in any of them. The next season, Díaz made his professional debut in a 3–2 loss with Everton for the first week of the 2005 Apertura Tournament. In the 2006 season, he played 29 matches between the Apertura and the Clausura Tournament.

In January 2005, aged 19, Díaz caught the attention of José Sulantay, who called up the player to play the South American Youth Championship held in Colombia. He made his U-20 debut during the championship. Following the qualification of the Chilean national youth team to the 2005 FIFA World Youth Championship, he was in the 23-man squad to play the world championship, but he didn’t play during the tournament.

After the one season, in the Apertura Tournament 2008, Díaz was a frequently starter in the squad of Arturo Salah, and scored his first professional goal with the club on 23 March, in a 3–2 loss with Huachipato, it was his first goal for Universidad de Chile. During the year he played 36 games between the Apertura and Clausura tournaments. After of the departure of Arturo Salah and the arrival of the Uruguayan coach Sergio Markarián, Díaz was used as a left back, unlike Salah that used him as an attacking midfielder. On 28 January 2009, he scored his first international goal in a 1–0 home victory to Pachuca. In the first semester of the season he won his first professional title, the Apertura Tournament, that his club won after beating 1–0 Unión Española in the playoffs final. The next season, now with the arrival of Gerardo Pelusso as the coach, Díaz was being used as right back and only played five league games.

On 13 August 2010, the player confirmed his incorporation to Deportes La Serena. There, he returned to the midfield, being deployed as an attacking midfielder. On 22 August, Díaz debuted in a 4–0 home win over Santiago Wanderers at La Portada Stadium. In his third match for the club against Audax Italiano, he scored his side’s goal in a 2–1 defeat in the 86th minute. On 3 October, Díaz scored a brace in a 3–3 draw with Everton, being red carded in the 91st minute. After a one match absence, and his return in the game against Unión Española, he again scored his side’s goal in a 2–1 away defeat with Universidad Católica. On 28 November, Díaz had a successful performance against Cobresal, being named the man-of-the-match and scoring a goal in a 2–0 win. Having finished the 2010 season, Díaz had a deal with Huachipato for a loan, but Universidad de Chile’s new coach Jorge Sampaoli wanted him to play for his team in 2011 and the player remained in the club.

Díaz began the season as a substitute player replacing to Guillermo Marino in all second halves of a game, but due to his good performances, he ended up replacing Marino on the starting lineup. On 4 June 2011, he scored a wonderful 26-yard free-kick versus O’Higgins, in Universidad de Chile’s amazing 7–1 rout for the playoff’s semi-final. Following the title obtained in the Apertura Tournament and the departure of Felipe Seymour to Italian Serie A side Genoa, Díaz started to play in Seymour’s former position in the starting lineup as a central midfielder, with a more defensive role.

When the Clausura Tournament began, former Universidad de Chile midfielder Manuel Iturra was heavy linked with the club, to replace to Seymour, but Sampaoli decided finally against Iturra and for Díaz, who with the given confidence stepped up his game and became one of the key players of the team. His great performances in the local tournament and in the 2011 Copa Sudamericana caught the eye of national team’s coach Claudio Borghi to play in the 2014 World Cup qualifiers. On 19 October, Díaz played in the Copa Sudamericana’s round of 16 match against Flamengo. In that match, Universidad de Chile historically beat 4–0 as visitors, something never done by a Chilean team. In the second leg match, Díaz scored the only goal of the game in a 1–0 win at Estadio Nacional, winning the man of the match award. The next game of his club against the rivals, Colo-Colo, and he again was the man of the match in a 2–2 away draw. In that same match, Díaz was punished by the Anfp for obscene gestures to the Garra Blanca, the barra brava of Colo-Colo. After his performances, he was called up by Borghi for play against the Uruguayan national football team at Centenario Stadium for the World Cup qualifiers. On 23 November, for the semi-finals of the Copa Sudamericana against Vasco da Gama, Díaz played in a 1–1 away draw at São Januário Stadium. He played an important role in the match, winning important balls in the middle of the pitch and assisting Osvaldo González, with a free kick to score the equalizing goal in the 79th minute. In the second leg game against the Brazilians, Díaz was named once again the man of the match in a 2–0 win. In the next game against LDU Quito for the first leg final, he made another assist to Eduardo Vargas, who scored the only goal of game. On 14 December, in the final of the tournament, Díaz played a good role in a 3–0 win over LDU, being crowned as the best champion of this tournament. According to the South American media, they compared to Universidad de Chile with Barcelona and Díaz with Xavi. Winning the Clausura Tournament, Universidad de Chile made a successful season earning three titles in one year, with Díaz as one of the key players of the season along with Johnny Herrera, Eduardo Vargas, Marcos González and José Rojas.

Six years after his participation with the U-20 team, on 7 September 2011, Díaz was called up by Claudio Borghi to play in the 2014 World Cup qualification against Uruguay and Paraguay, in place of Carlos Carmona, who was banned for his participation in the scandal of “Bautizazo”. On 11 November, Díaz officially debuted for the Chile senior team in a 4–0 away loss at Centenario Stadium, being replaced by Milovan Mirosevic in the 61st minute. Due to his good performances for Universidad de Chile, he was called up for the match against Ghana at PPL Park, in where he played well in a 1–1 draw. He started again the qualifiers against Bolivia and Venezuela, both 2–0 away victories, where Díaz excelled.

On 4 January 2012, the club received a US$1.5 million bid of Argentine Primera División side Newell’s Old Boys for Díaz, but the same player rejected the deal, to play the Copa Libertadores, being also retained with pay rise of part of directive. He was candidate for be the club’s captain, with the departures of José Rojas and Marcos González to the Brazilian Série A, but finally with the return of Rojas to the club because of problems with his new contract, Pepe remained as captain. Díaz started the season of fine form scoring a penalty goal in a 3–1 win over his old club Deportes La Serena in the first game of Universidad de Chile at the Apertura Tournament. On 25 February, he missed a penalty kick against O’Higgins in a 3–0 loss, that was saved by the adversary’s keeper Luis Marín for the fifth week of the Apertura. On 10 March, he played a great match giving two notable assists in a 6–0 thrashing over Audax Italiano, then being called up by Borghi to the national team for play the Copa del Pacífico against Peru at Arica and Tacna. On 4 April, he was named the man of the match in a Libertadores 1–0 victory over Godoy Cruz at Mendoza, making another excellent match for his team on 29 April in the Chilean derby against Colo-Colo, in where he scored the first goal of the game and also made three assists, after a successful free kick in a 5–0 home win at the Estadio Nacional. On 9 May, was confirmed that Díaz was sold to Swiss Super League side Basel for $4 million. On 11 May, he scored a 30-yard goal in a 6–0 rout over Deportivo Quito for the Libertadores.

After winning the Apertura with Universidad de Chile, Díaz joined the Swiss side Basel in the summer of 2012, on a four-year deal. He made his debut on 17 July, on a UEFA Champions League second qualifying round first leg fixture, a 2–0 away victory against Flora Tallinn. Díaz scored his first goal for Basel during the return leg against Flora Tallinn, from a free kick, on 24 July. He made his Swiss Super League debut for Basel in St. Jakob-Park during the 2–2 home draw against Luzern on 21 July 2012. He scored his first league goal for them during the 2–1 away win in the Stade Olympique de la Pontaise against Lausanne-Sport on 17 February 2013. At the end of the Swiss Super League season 2012–13 Díaz won the Championship title and was Swiss Cup runner up with Basel. In the 2012–13 UEFA Europa League Basel advanced as far as the semi-finals, there being matched against the reigning UEFA Champions League holders Chelsea, but they were knocked out, losing both home and away tie, beaten 2–5 on aggregate.

The 2014–15 season was also a successful one for Basel, but for Díaz it was an unlucky and unthankful season under their new trainer Paulo Sousa. Despite the fact that Basel won the championship later that season for the sixth time in a row and despite the fact that Basel had entered the Champions League in the group stage reaching the knockout phase on 9 December 2014 as they managed a 1–1 draw at Anfield against Liverpool, Díaz totaled just 24 appearances during the first half of the season, 13 (from 18) League, 2 Cup (of 3), and just 3 (of 6) in the Champions League, as well 6 further appearances in test games. Because Sousa did not rely upon Díaz, he was forced to leave the club during the winter break.

On 2 February 2015, Díaz signed for German Bundesliga club Hamburger SV on a three-and-a-half-year deal. On 1 June 2015, he scored his first goal for the club in its relegation play-off match which took place at the end of the 2014–15 Bundesliga season, against Karlsruher SC. Many Hamburg fans consider Díaz’s 91st minute free-kick goal which helped save Hamburg from its first ever relegation to be one of the most important goals ever scored in the club’s 128-year history. After the match, it was revealed that Rafael van der Vaart, Hamburg’s captain and first choice for free-kicks, was to take the kick. Diaz, however, spontaneously told Van der Vaart that he could take a shot “tomorrow, my friend” and went on to perform the free-kick himself.

Díaz started all six matches in the 2015 Copa América, helping Chile win in a penalty shootout against Argentina, to win their first major international honor. For his performances he was named in the Team of the tournament.

In January 2016, Díaz transferred to Spanish La Liga side Celta de Vigo. He scored his first goal for the club on 16 April 2017, in a 3–0 away win against Granada CF.

On 17 August 2017, Díaz left Celta by mutual consent.

On 17 August 2017, Díaz signed a contract with Liga MX side Pumas UNAM as a free agent.