Davies shot hard and low from 20 yards out to break Blades hearts after Nicolas Anekla set up the former Sheffield United trainee. It beat Kenny who had been magnificent all game and was at no fault in the goal.
Paddy Kenny had pulled off World class saves to deny Nicky Hunt, Nicolas Anelka and Kevin Davies whilst Gary Speed fired wide.
United however did have their chances with Jussi Jaaskelainen shutting out Mikele Leigertwood, Michael Tonge and Keith Gillespie.
Blades boss Neil Warnock stripped down and re-assembled his back four, essentially picking four central defenders to cope with Bolton's aerial threat.
It looked a wise decision as Bolton typically got the ball forward quickly and got crosses in.
Gary Speed arrived to head the first from Davies narrowly wide, while Blades' keeper Kenny grabbed Kevin Nolan's cross under pressure from Nicolas Anelka.
Both keepers breathed sighs of relief as they were guilty of spillage. Jaaskelainen fluffed Colin Kazim-Richards' cross and was let-off as they ball bounced away from Christian Nade.
At the other end, Davies' shot escaped Kenny's grasp and rebounded to safety off the onrushing Nolan.
Kenny redeemed himself with two stunning saves, the first climbing to his right to tip away Hunt's volley, and then he arched to his left to claw away Anelka's curling shot.
Sheffield United were under the cosh but might have taken the lead just before the break when Keith Gillespie's shot deflected off Ricardo Gardner and clipped the outside of the post with Jaaskelainen completely wrong-footed.
Bolton won two free-kicks in promising positions at the start of the second half, with Speed driving the first one over and Anelka's effort clipping off the wall and deflecting over.
Kenny rescued his side for a third time, reacting superbly if unorthodoxly, to block Davies' close-range effort with his legs.
The Blades needed to show more ambition to stem the one-way traffic which was threatening to overwhelm them. They did that when Nick Montgomery's low shot drew a save from Jaaskelainen.
But Speed missed a great chance to put Bolton ahead when Phil Jagielka's clearance fell to him 18 yards out, but he dragged his shot wide.
The Blades were riding their luck when Davies nodded El Hadji Diouf's cross down and Anelka reacted by sticking out a leg but from three yards out he directed the ball the wrong side of the post.
Kenny belied his bulky frame and showed his speed off the mark by twice sprinting from goal to deny Anelka as he looked to latch on to through balls.
For all Kenny's heroics, it needed a brilliant one-handed save from Jaaskelainen to deny Tonge what would have an unlikely winner.
It proved to be a vital save as within seconds Davies scored Bolton's winner.
Anelka picked up a clearance and cut inside before laying the ball into Davies' path and his low, raking shot beat Kenny's dive.