The 20-year-old initially joined the Shrews in January and has since made seven appearances, scoring once in the process.
Manager Graham Turner is delighted to have tied Davis down for the rest of the campaign.
"Dave has done very well for us," he told the club`s official website.
"I was pleased to see him getting on the score sheet and finishing off his chance really well at Northampton.
"He has contributed a lot to the team and we are delighted that he is staying until the end of the season."
Source: PA
Source: PA