According to Sportsnet.ca:
Welterweight contender Carlos “The Natural Born Killer” Condit is on the verge of withdrawing from his UFC 127 bout against Chris Lytle, sources tell Sportsnet.
Condit (26-5) has apparently suffered a knee injury and it looks as if it will hamper his performance in the bout.
[UPDATE] – MMA Junkie confirms Condit is out:
Carlos Condit will be out of action for a minimum of a month and will be unable to compete. It’s unknown at this time whether the UFC has found a replacement for Condit.
UFC 127 Trailer