After a season of success on the pitch, interspersed with rumours about his future off it, the Scot and Reds owner Nigel Doughty have held talks this week.
"Billy has done a marvellous job and he's here for the long-term," said Doughty.
"We've asked him to build a club and he's going to take on that challenge.
"We have a young, talented squad that's only going to get better."
Having sorted out his own future, Davies will now turn his attention to improving his squad for next season.
First names mentioned in that regard are Swansea City's Darren Pratley and Chelsea left-back Patrick Van Aanholt, who had loan spells in the Championship with Coventry City and Newcastle last season.
"He is definitely not for sale," Swans chairman Huw Jenkins said of Pratley.
"He’s under contract, he’s been with us for a number of years, he’s settled and he loves it here.”