Davies has been one of the breakthrough acts anywhere in Europe this season, with his marauding runs from left back catching the eyes of many football lovers.
The Canadian international, born in a refugee camp in Ghana to Liberian parents, joined Bayern Munich from Major League Soccer outfit Vancouver Whitecaps in January 2019.
The 19-year-old made 29 appearances in all competitions, including 21 in the German top flight, before the season was suspended because of the Coronavirus pandemic.
"I am very happy," Davies told Bayern Munich’s website after signing his new deal.
"FC Bayern is one of the best clubs in the world, and for me it's a dream come true to play here. I felt happy from day one. I want to win as many titles as possible with this club. The mentality of always wanting to win everything is in FC Bayern's DNA.”
Davies already has one Bundesliga winners’ medal from last season, and with Bayern’s four-point buffer at the top of the table this term, he could add another when the season resumes from its enforced break.
Bayern chairman Karl-Heinz Rummenigge said: “Alphonso has developed very well at FC Bayern. He has earned this contract extension with his convincing services. We are happy that he will stay with Bayern for the long term. He not only enthuses our fans with his style of play, but also with his way of playing next to the pitch.”