Can you mix 12/2 and 10/2 wire on a 20 amp circuit?

I used to have a 10/2 220 line that went from my panel to my hot water heater.

I have since taken the electric hot water heater out and replaced it with a oil fired unit.
The installers unhooked the wire from the breakers, but left the 10/2 in the finished ceiling.

The old electric water heater was near my workshop. I would like to use the 10/2 wire that is already run (with a new 20A breaker, of course) to get a new 20A circuit to my shop.

However, once the 10/2 line gets to the first plug, can I just run 12/2 to a couple other outlets? I think it is OK because the 10/2 is big enough to carry the 20A and the 12/2 is also big enough. I'm just not sure if mixing 10/2 and 12/2 is to code or not?

So it would be Panel -> 20A breaker -> 10/2 -> outlet -> 12/2 -> outlet -> 12/2 -> outlet.