The midfielder, who is currently sidelined with a shoulder injury, is expected to sign the extended deal by the end of this week.
Talks with the 24-year-old have been ongoing for weeks, and while the club is yet to confirm a conclusion, it is expected his stay will be confirmed before the trip to Watford on Saturday.
And securing his stay is a big boost to Wanderers boss Dougie Freedman who is building for the future.
The Bolton News reported in November the club were keen to begin talks with Davies’s representatives over an extension weeks before speculation resurfaced that Swansea City were monitoring the situation after having two bids rejected for Davies last summer.
Davies netted three goals in his last five outings for Wanderers before injuring his shoulder in a 2-2 draw at Huddersfield in December.
Swans boss Michael Laudrup was reportedly weighing up an improvement on the £4million and £5m offers for Davies which had been rejected in the summer.
And while the ex-Wolves man’s current deal does not run out for another two-and-a-half years, it now appears Freedman has quashed any further transfer talk ahead of Thursday’s deadline and sealed an extra two years for the highly-rated midfield man.