In a recent column for Irish publication The42.ie, Kavanagh said he feels a proposed trilogy with Diaz (19-11) is the most exciting option -- but that a turnaround this year seems optimistic.
"It's probably a little late in the day to realistically expect another fight before the end of the year," Kavanagh wrote. "Even after this hiatus is over, a lot goes into planning and execution of a training camp at our level.
"I find it hard to envisage another fight in 2017."
Prior to McGregor's Aug. 26 boxing match with Floyd Mayweather, which he lost via TKO in the 10th round, UFC president Dana White said McGregor planned to fight again this year. The UFC has a Dec. 30 date in Las Vegas.
McGregor (21-3) appeared to escape the Mayweather loss with no serious injury. He was medically suspended by the Nevada State Athletic Commission for two months, which is not unusual following a TKO loss.
The Dublin native is the UFC's current lightweight champion. He won the title by knocking out Eddie Alvarez at UFC 205 in November. He has not yet defended the title.
The UFC has booked an interim lightweight title fight between Tony Ferguson (22-3) and Kevin Lee (16-2) at UFC 216 on Oct. 7 in Las Vegas. The winner of that bout would have an obvious case to fight McGregor next.
McGregor, however, has long expressed interest in a third fight with Diaz, who submitted him when they first met in March 2016. McGregor went on to win a majority decision in the rematch.
McGregor has stated their third fight must take place at 155 pounds. The first two were fought at 170 pounds.
"To be completely honest, I didn't actually know who Kevin was until very recently," Kavanagh said of the Lee-Ferguson bout. "Tony is a solid fighter, but he doesn't have the kind of appeal that would get your blood racing, particularly in the context of coming from the excitement of the Nate Diaz rematch, the historical significance of beating Eddie Alvarez at Madison Square Garden and the novelty of facing the greatest boxer of his generation.
"This is all accompanied by the caveat that it's merely the opinion of John Kavanagh, but I'm sure people will be able to relate to my perspective on the situation."
Diaz hasn't fought since the second bout with McGregor, in August 2016.