They talked about it on twitter, and apparently the UFC liked what they came up with so they went with it. Carlos Condit will face one of the biggest challenges of his career when he faces former UFC welterweight and lightweight champion B.J. Penn at UFC 137. UFC.com announces it:

The title fight between GSP and Nick Diaz won't be the only showcase for elite 170-pounders this fall in Las Vegas. A match between two of the best welterweights in the world has been set as "Natural Born Killer" Carlos Condit will take on BJ "The Prodigy" Penn at UFC 137.

...

Dana White confirmed today that both men have verbally accepted the bout.

Condit is coming off his excellent knockout of Dong Hyun Kim at UFC 132, while Penn has been out since his draw with Jon Fitch at UFC 127. It was thought that Penn would rematch Fitch, but the UFC has decided to go in another direction and made what they feel is the more exciting fight.

Carlos Condit (27-5)
Win Dong Hyun Kim - KO (Flying Knee and Punches) UFC 132
Win Dan Hardy - KO (Punches) UFC 120
Win Rory MacDonald - TKO (Punches) UFC 115

B.J. Penn (16-7-2)
Draw Jon Fitch - UFC 127
Win Matt Hughes - KO (Punches) UFC 123
Loss Frankie Edgar - Decision (Unanimous) UFC 118