On 7 February 2013, Davies returned to Nottingham Forest as manager, signing a three-and-half-year deal, 20 months after being dismissed by the previous Forest board. Davies took charge of his first match since returning as manager on 16 February 2013, a 1–1 draw against Bolton at the City Ground. The first victory of his second spell came three days later, a 6–1 win at home against Huddersfield Town. This was followed by his first away game at Charlton Athletic where Forest won 2-0. Under Davies they won six games in a row, including a 2-1 away win against second placed Hull City, placing them fifth in The Championship table and in a play-off position. Forest were unable to sustain their form and eventually finished eighth after losing 2-3 to Leicester City on 4 May 2013.