The 27-year old had been in talks with the Wanderers this week about extending his current deal, which was due to run out at the end of the season and is now the third player in a week to pledge his future to the club following on from Kevin Nolan and Henrik Pedersen who signed up to new terms last weekend.
"I am very pleased to have sorted this out. I have really enjoyed my time at Bolton so far and there was never any question of me wanting to go somewhere else." Davies said this morning
"The manager, the staff, the players and especially the fans have all made me feel welcome from day one and whilst things have gone well for me so far, I still feel there is a lot more still to come. I am feeling fit and strong and desperate to score more goals for this team.
Davies was signed from Southampton in the summer of 2003 following a successful trial spell and he beleives that the current crop of players are on the verge of achieving something big.
"The manager has built a great squad here and everyone is working towards making a bit of history for this club. We are all well aware that this is a great chance for us to achieve something special in our careers and I will be doing my utmost to make it happen."