The 29-year-old from Port Colborne, Ont., who trains out of San Diego, will fight bantamweight champion (Rowdy) Ronda Rousey on July 5 in the co-main event of UFC 175 in Las Vegas.
UFC president Dana White announced the matchup Friday night via Twitter. Davis responded via the same medium.
"Somebody pinch me because I think I'm still dreaming!! Lol. Christmas is coming July 5th in Vegas," she tweeted.
Rousey (9-0) is the face of women's mixed martial arts and arguably the UFC's current biggest star.
It will mark the 27-year-old Rousey's fourth title defence. She has already disposed of Liz (Girlrilla) Carmouche, Miesha (Cupcake) Tate and Sara McMann.
Davis is looking to join a select Canadian group of UFC title-holders or challengers.
Montreal's Georges St-Pierre was the longtime UFC welterweight champion before vacating his title in December to take some time away from the sport. Carlos (The Ronin) Newton of Newmarket, Ont., held the welterweight title in 2001.
And Montreal's Patrick (The Predator) Cote lost his middleweight title shot against Anderson Silva at UFC 90 in October 2008. Silva won by third-round TKO when Cote was unable to continue due to a knee injury.
Canadians Harold Howard and Dave Beneteau were runners-up in the UFC 3 and 5 tournaments, respectively.
Davis (16-5) has won eight of her last nine fights including all three in the UFC. But she faces a step up in class in Rousey, an Olympic judo bronze medallist who is the only 135-pound women's champion the UFC has ever had.
Rousey has won eight of her nine fights in the first round, with eight of the wins via armbar.
A pro since 2007, Davis's last loss was via majority decision in a March 2012 rematch in Strikeforce with Victoria's Sarah Kaufman, currently No. 5 in the women's rankings.
Davis, who has black belts in both traditional and Brazilian jiu-jitsu, has already beaten UFC opponents Carmouche, Rosi (The Surgeon) Sexton, and Jessica (Evil) Eye to rise to No. 2 in the rankings.
No. 1 contender Cat Zingano has been sidelined by knee surgery and subsequent complications.
The five-foot-five Davis started kick-boxing with a friend, then made the move to jiu-jitsu at 18. She switched to MMA after watching someone else in her gym training.
Chris Weidman defends his UFC middleweight title against Lyoto (The Dragon) Machida in the UFC 175 main event.