Davis spent time on loan at Chesterfield earlier in the season, but has impressed for Wolves in recent games.
The 21-year-old told the club’s website: “This new contract really is the icing on the cake for me.
“It’s secured my future at my club, Wolves, the club I want to play for. It really is a dream come true.
“I have been learning the trade whilst I’ve been out on loan and now I’m back here playing in the best league in the world. It’s a big achievement for me.
“Obviously, us getting relegated has been a bitter disappointment but I think that we can bounce back and I would like to play my part in that objective.”
