Davis was all set to leave the club in the close season but a move to Everton fell-through because of the players injury problems.
Now Davies has decided to stay with the club: "During the time I have been recovering from my injury I have had the opportunity to discuss my future with the manager," Davis told the clubs official website, www.fulhamfc.com
"He has made it clear to me that not only does he see me as an important part of his plans but I also believe the Club can move forward.
"I have been involved with Fulham since I was 16 and I am grateful for all the support I have received which has helped me become the player I am today.
"I think that because I had been here for a long time, I felt I needed to move or be part of another club to realise my ambitions as a player. I now think that I can realise those same ambitions here at Fulham."