Davies gained a PPE degree from Oxford University in 1974, and started his journalism career in 1976, working as a trainee for The Mirror Group in Plymouth. He then moved to London initially to work for the Sunday People and spent a year working for The Evening Standard before becoming a news reporter at The Guardian in July 1979. Since then he has worked as home affairs correspondent at The Observer; chief feature writer at London Daily News in 1986 and on-screen reporter for World in Action. After the London Daily News folded he moved to the USA for a year, where he wrote White Lies, about the wrongful conviction of a black janitor for the murder of a white girl. Since 1989 Davies has been a freelance reporter for The Guardian, for which he continues to contribute articles as of 2009, working from his home in Lewes.

Following the publication of Flat Earth News and a Guardian story co-authored by Davies claiming that News of the World journalists tapped private mobile phones to get stories, on 14 July 2009 Davies told the Culture, Media and Sport Select Committee that the Metropolitan Police Service had done too little to investigate the claims. The Guardian coverage also led to calls from high-profile MPs for the dismissal of Andy Coulson, communications director for the Conservative Party.

Davies should not be confused with a different Fleet Street journalist, also named Nicholas or Nick Davies, who was the foreign editor of the Daily Mirror and a close associate of Robert Maxwell before resigning amidst allegations he had sold arms and worked for Mossad, the Israeli intelligence agency.

Flat Earth News was greeted in the London Review of Books on its publication as "a genuinely important book, one which is likely to change, permanently, the way anyone who reads it looks at the British newspaper industry". The LRB highlighted the analysis showing that 60% of the content of UK papers was based mainly on wire copy or press releases, while only 12% are original stories and only 12% of stories showed evidence that the central statement had been corroborated (see Churnalism). Mary Riddell in The Observer disputed some of the charges against British journalism in the book, and described it as "unduly pessimistic". Peter Oborne in The Spectator concentrated on the use of illegal techniques to invade privacy rather than declining standards, describing Flat Earth News as "hypnotically readable" and praising the collection of evidence that the practice of journalism is "bent", although qualifying this somewhat by suggesting that Davies "ignores a great deal [of journalism] that is salient and good".