The new contract will keep Davies at Bayern Munich until June 30, 2025.
CEO Karl-Heinz Rummenigge said the 19-year-old has earned this contract extension with his impressive performances.
"Alphonso has developed very well at FC Bayern and has earned this contract extension with his impressive performances. We are happy that he will remain with FC Bayern in the long term. He delights our fans not only with the way he plays, but also with the way he is off the pitch," Rummenigge said in a statement.
Sporting Director Hasan Salihamidzic said he is 'very pleased' and Davies is an ideal fit for their team.
"I am very pleased that FC Bayern and Alphonso have made a long-term commitment to each other. With his speed, his enthusiasm and his professional attitude, Alphonso is an ideal fit for our team. He is also a real asset in human terms. It is up to all of us here to ensure that Alphonso continues to stabilise his very good performance, that he takes the next steps in his development with the same concentration and courage as he has up till now," Salihamidzic said.
( With inputs from ANI )