Diaz has been missing from Hollywood for quite some time, with her last movie – the newest adaptation of the musical Annie – coming out in 2014.
It capped off a busy year in which she also starred in Sex Tape and The Other Woman, but it seems she has no desire to make any further films.
“I had lunch with Cameron the other day,” Blair told Daily Star.
“We were reminiscing about [The Sweetest Thing]. I would have liked to do a sequel but Cameron’s retired from acting.
“She’s like, ‘I’m done’.”
Blair added: “I mean, she doesn’t need to make any more films. She has a pretty great life, I don’t know what it would take to bring her back. She’s happy.”
Diaz had spoken before about taking time away from the spotlight.
“I just went, ‘I can’t really say who I am to myself.’ Which is a hard thing to face up to,” she said last year. “I felt the need to make myself whole.”
The star has made a number of hugely successful films, including There’s Something About Mary, The Mask, The Holiday and the Shrek films.
She never picked up any recognition from the Oscars, but she did scoop four Golden Globe nominations, as well as a BAFTA nod in 1999 for Being John Malkovich.
The 45-year-old also published a book in 2013: The Body Book was a health title co-written with Sandra Bark, and it hit No2 on the New York Times Best seller list.
Its follow-up, The Longevity Book, followed in 2016.