Davis, 66, will leave after five years as head of the state's 35-campus public college system, a move that opens up Georgia's highest college position just as a new governor takes office.
Davis, who was the retired chairman of a multi-billion-dollar utility when he took the job in 2006, told the state Board of Regents that a new governor will need a long-term chancellor.
"The opportunity to lead this great system of public higher education has been a tremendous experience with both challenges and rewards," Davis said.
His exit comes as Georgia's colleges and universities continue to grapple with some of the worst higher education budget cuts in the state's history.
Campuses have been plagued by layoffs, furloughs and program cuts after losing hundreds of millions of dollars in state funding.
Davis came into office five years ago as the system was in flux.
"Chancellor Davis has led the university system through an unprecedented period of growth and budget challenges," Gov. Sonny Perdue said. "He has served as a steady hand on the wheel, ensuring the system never strayed from its core mission of educating students."
Davis has overseen a spike in enrollment from 260,000 to more than 310,000.
He created a plan to expand the state's medical education programs in hopes of addressing an impending shortage of doctors in Georgia.
He also stepped in last year to defend the state's public historically black colleges when state lawmakers considered merging the campuses with majority white institutions nearby to save money.
"Chancellor Davis has been, and is, an impressive individual who has brought to the University System an extremely high level of experience and ethical leadership," said board chairman Willis Potts. "The regents, the presidents, the state and, above all, our students, have benefited from his outstanding stewardship."
Davis has also had troubles.
He's taken heat from state lawmakers upset over how the university system responds to potential budget cuts with what some legislators say are scare tactics.
For example, officials proposed cutting the popular 4-H program entirely earlier this year.
"I thought they needed to early on start reeling in things," said state Senate Higher Education Committee Chairman Seth Harp, a Republican from Columbus. "There's an awful lot of administration in all of our colleges and universities and somebody needs to take care of that."
Under Davis' watch, more than a dozen college and university workers resigned -- and some were imprisoned -- after it was discovered they were abusing their state-funded purchasing cards and stealing hundreds of thousands of dollars in state money for personal use.
The discovery led to tighter restrictions on the use of the cards and stiffer oversight of the $350 million program.
The Board of Regents will launch a national search to find Davis' replacement.