His last fight -- a loss to to Allan Goes in the now-defunct IFL -- took place in November 2006. Since then, the 38-year has remained active as a jiu-jitsu instructor, most recently taking over the Renzo Gracie Jiu-Jitsu Academy in Stamford, CT.
But when Gracie stopped by The MMA Hour on Monday, he announced that his time away from MMA was coming to an end later this year.
"I can't just watch it. I was getting cranky because I wasn't fighting. Actually, I decided to take a little while from MMA because my English was terrible. I could talk but not teach jiu-jitsu, so I said, I have to learn to teach in English, because I know that my future is going to be having a jiu-jitsu school and teaching jiu-jitsu."
Gracie's return to MMA will take place on Nov. 20, but he wouldn't specify where and against who. It won't be at UFC 123, though, which also takes place on the same day.
He's a five-time champion in the Brazilian National Jiu-Jitsu Championships and two-time champion at the World Jiu-Jitsu Championships. He also placed third at the 2005 Abu Dhabi Submission Wrestling World Championship in California.
Gracie was thrown into the fire in June 2002 when he made his MMA debut at PRIDE 21 alongside his cousin Renzo and the likes of Fedor Emelianenko and Anderson Silva.
He won his first two fights, but then went 2-2-1 in his next five fights before taking a break from the sport.
"My first fight was in PRIDE in front of 60,000 people. I didn't have any amateur fights; I didn't have any small event to start with. I was more scared about the people watching than the fight. I was like, 'Man, what am I doing here?' You know, 60,000 just for you.
But Gracie knew he would return to MMA someday, it was just a matter of when.
"All those years, I didn't stop to train. I was training, but at the same time, I looked at people fighting and said, 'Man, I miss [it].' But I know that I am going to be there again and now is the time. I'm feeling stronger, I have more knowledge in MMA.
"I want to fight in the best shape of my life. And that is what I am doing right now. It's time to get back and it's time to get excited again."
By the time his career is officially over, Gracie would like to compete in at least 20 pro MMA fights. That means he has 13 fights left to go.
He will return in a year that saw his family members Rolles and Renzo make their UFC debut, as well as Roger make his Strikeforce debut.
There certainly seems to be a new wave of interest in MMA by the Gracie family, and Daniel said he he knows exactly why.
"Because we belong there. Everybody is fighting there because of us. So why are we going to be out watching? That's impossible."
(Ed. note: Watch Monday's episode of The MMA Hour below.)