Davies enabled Bolton to recover from conceding a first-half goal to record a memorable away win.
Southampton began brightly enough and had the better of the match until Davies turned it on its head by being involved in both goals as time began to run out.
Jay-Jay Okocha struck the top of the bar with a fearsome 30-yard shot in the sixth minute, while both Kevin Phillips and James Beattie missed clear openings for Southampton before the home side took the lead.
The goal was made in the 21st minute by a raking crossfield pass from Paul Telfer at right-back which Latvian striker Marian Pahars took on his chest before racing on to beat the on-rushing goalkeeper.
Referee Steve Dunn booked seven players, often for trivial offences, and Phillips was the first of those in the 23rd minute for what seemed a straightforward foul, Bolton's Kevin Nolan soon following him, also for a foul.
Bolton always looked dangerous on the break and Davies should have equalised in the 28th minute, but from inside the six-yard box his shot was superbly blocked by goalkeeper Antti Niemi.
Ivan Campo and Telfer were also booked for fouls as Southampton went in at the break narrowly ahead.
Bolton sent on Nicky Hunt in place of Anthony Barness at the interval and it was they who had the better of early exchanges after the break, Davies shooting over the bar and Okocha was well wide from 25 yards.
Yoann Folly and Emerson Thome were also cautioned midway through the second half while for Southampton substitute Anders Svensson was narrowly wide with a 20-yard shot and Jussi Jaaskelainen did well to pluck a free-kick from Danny Higginbotham from under the bar.
Just when it seemed Bolton had run out of ideas on a bright and sunny afternoon, Southampton failed to clear on the edge of their own area and Davies centred to the far post for Nolan to head in unattended.
Southampton were still reeling from this setback when Okocha centred from the right and Davies was unmarked when he headed in his 10th goal of the season giving Niemi no chance to save.
Saints manager Paul Sturrock, whose side began the match in with an outside chance of qualifying for Europe, sent on Fabrice Fernandes in place of Pahars with 11 minutes remaining, but the Bolton defence, marshalled by the experienced Campo, clung on without further alarms.
Bolton's defence kept a tight grip on Beattie and Phillips, scorers of 28 goals between them this season, and gave them little scope to add to their considerable tally.
There was an early blow for Southampton when they lost former England full-back Graeme Le Saux with a recurrence of hamstring trouble after only ten minutes, Fitz Hall replacing him and the versatile Higginbotham reverting to left-back.
Bolton manager Sam Allardyce said: "This was a fantastic win for us. Any Premiership game is difficult away from home and we did well to turn it around in the space of one minute in the second half.
"The second goal was pure quality and I suppose it was written in the script for Davies to return and get the winner.
"Davies joined us in the last week in June and said he wanted to train with us without pay for any contract offer.
"We went to Ireland for a pre-season tour and that was enough for me because I could see his quality.
"His attitude has got better and better. His dedication was questionable in the past, but it has improved with us beyond recognition.
"In my eyes he has got to be player of the season for Bolton, leading the line sometimes on his own and getting ten goals.
"Gordon Strachan obviously did not fancy him here at Southampton, but football is all about opinion and Davies may have contributed to his own downfall here.
"But ever since he has been at Bolton he has been top quality and has shown why so much money had been lavished on him in the past."
Man of the Match: Kevin Davies - Returned to haunt his former club with a dominant display in attack and made the ultimate impact with the winning goal for the Trotters.