Born in Birmingham, Davis started his career with Stoke City as an apprentice in 1982 but never made a senior appearance. However, he played more than 140 matches for both Crewe Alexandra and Burnley, making his Crewe debut at the age of 18, and captaining the side aged 19. He was also a key figure in the time he was at Burnley. He then played over 100 games for Barnsley in Division 1, in which they won promotion to the Premier League. He had loan spells at York City and Oxford United, eventually being signed by Division 1 outfit, Oxford United in 1998.
However, his managerial career at Nantwich Town was the most successful time in the club's long history, converting a club that had never achieved anything above the North West Counties League to one that was challenging for a Conference spot. He led Nantwich to two promotions in three seasons and a FA Vase victory, just missing out on promotion to the Conference North at the end of the 2008–09 season. His abilities attracted the attention of Crewe Alexandra, where he had spent four seasons as a player. On 17 May 2009, it was announced that he would become assistant manager to Gudjon Thordarson at Crewe.
On 10 November 2011, Dario Gradi stepped down and Steve Davis was appointed as manager. Davis's first game in charge was a FA Cup tie: a 4–1 loss to Colchester United on 12 November 2011, giving Davis his first defeat as Crewe manager. Davis's first league game in charge was a 2–1 win away to Morecambe. Also as manager of Crewe, Davis introduced his squad to yoga sessions for training.
"They're not a very flexible bunch. If you can help flexibility, you prolong their careers. It will cut down the injuries and strengthen areas where they're weak at the moment. It's something different and it will freshen things up."
Davis managed the team during a surge up the League 2 table in early 2012, which included an unbeaten run that took Crewe into the play-off places following a 1–0 home win over Cheltenham Town on 21 April 2012, earning Davis a nomination for Manager of the Month in March. Extending the unbeaten run to 16 matches with an away draw at Torquay and a home draw against Aldershot, Crewe consolidated 7th place in the final table, earning a play-off against Southend. Crewe won the first leg 1–0 and then secured a 2–2 draw at Roots Hall, extending the unbeaten run to a club-record 18 matches and securing a play-off final against Cheltenham at Wembley, which they won 2–0 to gain promotion to League One.
The following season (2012–2013), Davis was manager as Crewe won the Football League Trophy, beating Southend United 2–0 in the final at Wembley. In May 2013, Davis was briefly linked with the then vacant Wolves head coach post.