The Colombian winger was dismissed during Bayern's 2-1 away win in Paris on Tuesday, 4 November, and UEFA confirmed the length of the ban on Friday evening.
Diaz had originally been shown a yellow card for a heavy challenge on Achraf Hakimi, but the decision was upgraded to a straight red after a VAR review.
The incident drew comparisons with Gianluigi Donnarumma's foul on Jamal Musiala during the Club World Cup earlier this year, when the PSG goalkeeper avoided a dismissal. Hakimi was unable to continue and was taken off shortly after the collision.
The ruling means Diaz will miss Bayern's next three Champions League fixtures: the away meeting with Arsenal on Wednesday, 26 November, the home clash with Sporting on 9 December, and the home game against Union Saint-Gilloise on 21 January after the winter break. Bayern had initially believed the forward would serve only a one-match ban.
According to Kicker, Bayern have asked UEFA for "additional clarification" on the disciplinary decision, raising the prospect of a formal appeal. Head coach Vincent Kompany admitted he had been surprised by the severity of the sanction.
"I was told it would be one match, so of course this changes our planning," Kompany said during Friday's press conference. "We will analyse the decision and decide what steps we need to take."
Kompany also confirmed that Serge Gnabry would be rested in the coming domestic fixture as Bayern prepare for Diaz's enforced absence in Europe. The Bundesliga champions are currently top of the league and remain unbeaten in this season's Champions League league phase, but they will now have to navigate the final matches of the year without one of their key attacking options.
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