Centre-back Davies' current deal was set to expire this summer but he will now stay with the Bantams until June 2015.
He told the club's official website: "The fact that Phil Parkinson, Steve Parkin and Nick Allamby all signed up again recently was a major factor for me.
"After that point it really was a case of if they still want me here then I'll be happy to sign on again.
"I want my career to keep progressing, and the reason I have signed this new deal is because I believe my career can progress here at Bradford City."
- Sports & Recreation
- Phil Parkinson
- Steve Parkin