Manager Ronald Koeman have decided to rewarded the 18-year-old with a long-term contract on Merseyside after the teenager established himself as a regular starter in the Toffees first team this season.
Davies told their official website: “It means everything to me to get a chance to be in the Everton first team and to try to stay there. It’s an unbelievable feeling.
“Everton has a long tradition of bringing young players through and the incentive has always been there for me to try to progress with the club.
“I used to look at Mikel Arteta and aspire to be out there playing alongside my heroes and, obviously, Wayne Rooney and Ross Barkley who came through the academy here, too, have been inspirational figures for me.
“People like David Unsworth have been great in helping me and other players to develop our game and become Everton players and it’s a privilege to be playing under this manager with everything he’s done and achieved in the game. I’m learning more and improving every day and I’m delighted to have been given this opportunity by the club.”
Davies has scored once in 19 appearances since breaking into the senior setup at the club.