Davis beat defending champion Nigel Bond 2-1 in the final at the Mountbatten Centre to take the £18,000 top prize.
One of snooker's all-time greats, 56-year-old Davis hadn't won a title on British soil since the 1997 Masters when he beat Ronnie O'Sullivan in the final. Davis dominated snooker throughout the 1980s, winning the World Championship six times, and can now add another title to his long list of honours.
Bond, who beat Tony Chappel in the final last year, took the opening frame by potting the last blue and pink. But world number 51 Davis, who was runner-up in this event in 2010 and 2011, hit back to win the last two frames, making breaks of 66 and 68.
"It's been great fun," said the ever-popular Nugget. "I've had a couple of cracks at this and I was thinking I'm going to get close and never win it - and obviously the standard will get better as the new players come in.
"So I thought, if I'm going to win it I better get my skates on.
"As we get older we realise how much we owe the game, because of how good it has been to us and how much everyone enjoys it around the world. We're still playing and this event is a way of getting together, so long may it continue"
Bond said: "Steve made two good breaks in the last two frames so he thoroughly deserved to win."
Stephen Hendry, playing in the event for the first time, got to the semi-finals before losing 2-0 to Bond, while Davis edged out Dave Harold 2-1 in the other semi.
Ball by ball scoring and results from tournaments