The former Scarlets and Leeds boss, who left his post at the WRU as Wales Under-20s coach and National Academy Manager to move to Sixways, has now put pen to paper to commit to a longer term deal until the end of the 2013/14 season.
Davies said: "I really enjoyed my first year at Warriors. What has really impressed me about the club has been Richard Hill's vision for where he wants to take the team and also the group of players we have assembled here, who are all keen to learn and develop.
"The supporters have also been magnificent. They remind me in many ways of my old playing days at Stradey Park for Llanelli as they sing and cheer the team on. I genuinely think they are a massive part of why this club is so special and the support for the players over the last 12 months has been fantastic.
"I'd talked about working with Richard in the past, but it is one thing talking about it and actually doing it," he added.
"In practice it has worked exceptionally well. I've enjoyed not only training the forwards but also looking at other aspects of phase play, the breakdown and being heavily involved with team meetings. Our partnership has worked well and I see my job to support Richard and the other coaches and players.
"There was one aim last year and that was to get back to the Aviva Premiership. That was our big goal. Now we have an opportunity to build on that and enjoy a strong future. Our first year back is going to be tough and challenging for everybody, but it is something we are all looking forward to. It's an exciting time."
Charlie Little, Managing Director at Warriors, said everyone at the club was delighted that both Richard Hill and Phil Davies had signed new contract extensions in quick succession.
"Richard and Phil work very well together, have similar values to the game and a very good understanding. Both have extremely strong reputations in world rugby and are critical to the future success of Worcester Warriors," he said.
"There was never any question about extending Phil's contract for the same reasons we applied with Richard Hill. We firmly believe that this management team can take the club forward and build a bright future.
"We hope with that stability, consistency and commitment from them our style of play will develop and bring us success on the pitch."