Davis claimed that he changed his mind after conversations with two Texas offensive coaches, family members and high school coaches.
"A lot of receivers are coming out," Davis said. "I need to see the big picture and see what I can be at Texas and in the Big 12. I want to maximize my stats and go to the BCS."
The 6-foot-1 Davis had been told that he could be a third-round draft pick.
"It's been tough for me," he said. "I did plan on coming out, but I need to do this one more time. I want to try to win the Biletnikoff Award. Those guys at Texas deserve another year."
The 195-pound Davis had 57 catches for 939 yards and seven touchdowns this season.
"I am sorry for any confusion today," Davis said in a statement released Thursday night. "I want everyone to know that I'm coming back for my senior year. I'm excited to be getting back with my teammates, Coach Brown and the whole staff when the semester starts up next week. I'm really looking forward to another year as a Longhorn."