Michal Syrowatka stunned the SSE Arena at Wembley as he captured the WBA Continental super-lightweight title.
The fight proved to be an absolute war as both exchanged damaging blows throughout the battle.
It was a thrilling fight from the first bell. Round one set the tone with a range of combinations from both men before Davies Jr. got into rhythm, controlling the early rounds and looked in command.
Round six was the turning point as Davies Jr got cut just above the eye and looked shaken from a flurry of left hooks.
Round nine Syrowatka touched the canvas and it appeared the Eastern European had gassed towards the backend of the fight.
With the Brit ahead on the scorecards going into the twelfth round, Syrowatka stunned Davies and the crowd, flooring him with a crisp hook before the fight was stopped moments later as the towel was thrown in.
Poland certainly experienced their Rocky moment as Davies lost for the first time.
Earlier, it was a comprehensive victory for Kid Galahad as he defeated Jose Cayetano via stoppage.
The 27-year-old produced a mature performance as his opponent provided a stubborn test. The Mexican soaked up pressure early on and continued to take punishment, bouncing off the ropes at times but refused to be sent to the canvas.
Galahad's superior strength and work prompted referee Marcus McDonnell to step in to stop the contest in round ten.
The Sheffield star picked up the vacant IBF Inter-Continental title and stretched his record to 23-0.
Galahad has moved one step closer to world title contention with an IBF ranking.
Joe Hewlett is lead writer for World Boxing News. Follow Joe on Twitter @Hewlett95