He returns with, according to chairman Fawas Al-Hasawi some unfinished business to deal with. The chairman said: "I'm delighted to welcome Billy back to our club and really look forward to working closely with him.
"Billy has unfinished business with the Reds and we know how hungry he is for success. In returning to the City Ground we believe his leadership will help us fulfil our ambition of making it to the Premier League.
"Billy is a Forest legend who needs no introduction to our loyal fans. We know how excited he is to pick up where he left off last time and we will back him 110%. This is a very exciting appointment for us."
Davies returns with his entourage including David 'Ned' Kelly, who has walked out of Walsall after eight days, and Julian Darby while Rob Kelly will continue as part of the team.
Davies said: "It is a privilege and an honour to be back in charge. As my new friend Fawas says I have unfinished business here at Forest and am relishing this great opportunity to return Forest to its former glory.
"My tenure at the City Ground was cut short last time and I can't wait to get my boots back on and training the lads. We have a great squad and I know I can get the best from them. Coming home to the Reds is a dream come true."
Since he left, Forest have been managed by Steve McClaren, Steve Cotterill, Sean O'Driscoll and Alex McLeish.
Source: Clarets Mad