Dillon is eligible for the 2021 Clash, held on the Daytona International Speedway road course, while 23XI’s full-time driver, Bubba Wallace, is not.
According to The Athletic, Root Insurance will sponsor the effort.
Dillon will return for the Daytona 500 later in the week, albeit in a different car; he’ll run the first two points-paying races of the season in Gaunt Brothers Racing’s No. 96.
He’s also set for a part-time schedule in Joe Gibbs Racing’s No. 54 in the Xfinity Series.
Running full time in the Cup Series last year for the now-defunct Germain Racing, Dillon earned one top five and two top 10s, finishing 26th in points.
23XI is the brand-new Cup team co-owned by Denny Hamlin and Michael Jordan.