The objective of this study is to extract two pairs of left and right deflating subspaces of a regular matrix pencil A−λB corresponding to the eigenvalues lying inside and outside the unit disk via computation of left and right disk functions diskL(A−λB) and diskR(A−λB) which are obtained from matrix sign evaluations of two suitable matrices. We propose a novel fifth order iterative method for evaluating matrix sign function which can be implemented to compute disk functions. Convergence analysis of the proposed method has been investigated globally along with the illustration of attraction basins. Asymptotic stability of the method is also presented. Then an application of deflating subspaces in solving generalized eigenvalue problem has been explored. Numerical test problems have been performed by considering matrices of various sizes to justify the efficiency and superiority of the proposed method.