The bout marks the third heavyweight attraction added to the event. The main event will see Brock Lesnar and Cain Velasquez face off for the heavyweight title, while Brendan Schaub and Gabriel Gonzaga will also meet.
MMAJunkie.com first reported the bout on Thursday afternoon.
The bout will be Duffee’s third in the Octagon. He set an official UFC record for fastest knockout in his debut, finishing Tim Hague in seven seconds. He returned in May against Mike Russow, dominating all but a few seconds of the fight. Those few seconds were crucial, however, as Russow staged one of the greatest come-from-behind knockouts in MMA history in the third round, clipping Duffee and sending him crashing to the mat.
Madsen will also be fighting in the UFC for the third time. He defeated Justin Wren in his official debut, then defeated Mostapha Al Turk and Karlos Vemola.
UFC 121 takes place Oct. 23 at the Honda Center in Anaheim.