The new deal will keep Davies at Nottingham Forest until the summer of 2017.
Nottingham Forest chairman Fawaz Al Hasawi said: “This is a fantastic day for Nottingham Forest.
“Billy and I have the same long-term vision for the club and I am absolutely delighted that he has agreed to sign an extension to his contract.
“I look forward with great excitement to working alongside him for many years to come as we aim to bring success back to this magnificent club.”
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Being an amiable guy is good for you and Jurgen Klopp is living proof.
Summer 2016 is set to be a very exciting time for football fans, as this is when the long awaited Euro 2016 tournament kicks off.