Davis graduated from the Rochester (New York) Free Academy in 1879 and for 10 years thereafter taught high-school science in Dunkirk, New York. In 1890 she entered Vassar College, Poughkeepsie, New York, as a junior, and after graduating in 1892 she pursued further studies at Columbia University, New York City. She then served as head resident at the St. Mary's Street College Settlement in Philadelphia (1893–97). In 1897 she undertook doctoral studies at the University of Chicago, and, after work there and at the University of Berlin and Vienna University, she received her Ph.D. in economics in 1900.

In January 1901 Davis began work as superintendent of the newly opened state reformatory for women at Bedford Hills, New York. Over the next 13 years the institution became famous for its experimental approach to penology. Davis instituted a prison farm, courses in various vocational subjects, and a cottage system. She was particularly interested in identifying various classes of reformable, habitual, and incorrigible offenders, and her work in that field induced John D. Rockefeller, Jr. (Rockefeller, John D., Jr.), in 1912 to establish a Laboratory of Social Hygiene on property adjacent to the reformatory to further such research. In 1909, during a European trip, she won international acclaim for her work in organizing self-help relief programs following a disastrous earthquake in Messina, Sicily.

In January 1914 Davis was appointed commissioner of corrections for New York City. She was the first woman to hold a top-level post in the government of that city, and she moved quickly to improve conditions in its 15 penal institutions, especially to suppress drug traffic, segregate women prisoners, and upgrade dietary and medical facilities. She established the New Hampton Farm School for delinquent boys and laid plans for a separate detention home for women (ultimately opened in 1932). In 1915, principally as a result of her efforts, the New York legislature enacted a program of indeterminate sentencing and parole supervision, and in December of that year Davis was named first chairman of the city parole board to direct the new system. She held the post until the end of the reform administration in 1918.

From 1918 until her retirement in 1928 Davis was general secretary and member of the board of directors of the Bureau of Social Hygiene, the department of the Rockefeller Foundation that had operated the Bedford Hills laboratory. There she directed research into narcotics trade and addiction, the “white slave trade,” various forms of delinquency, and other aspects of public health and social hygiene. In 1929 she published Factors in the Sex Life of Twenty-two Hundred Women; she was also author of a great many articles in professional and popular journals.