The 19 year old was handed the honour ahead of the England and New Zealand captains Jack Clifford and Ardie Savea who were also shortlisted.
Gavin Henson was the last Welshman to achieve a similar status in 2001 when he won the award which was then called the IRB Young Player of the Year.
Davies was named after playing in the IRB Junior World Championship final at Stade de la Rabine in Vannes, France where Wales lost out to England by 23 points to 15.
IRB Chairman Bernard Lapasset said: “I extend my warm congratulations to Sam on winning the IRB Junior Player of the Year 2013 Award. He is a magnificent fly half and he brought this tournament to life with his skills and determination,”
“He was pivotal for Wales in some crucial matches, including kicking the conversion which saw them reach their first JWC final, and he has the potential to be a future star of world Rugby. He is a fantastic young player and I wish him all the best for his career ahead.”
Davies said: “It is an honour, just to see the names of the other people that have had it before me, it makes it extra special. I’m gutted with the result of the final, but this is a bonus picking up this award.”
The Wales outside half put in some outstanding performances during the tournament, playing in every round, with his calmness and composure under pressure pivotal, allowing him to unleash players outside him and also to slot some vital goal kicks including the conversion that put Wales in the first JWC final.
Wales Under 20 head coach Danny Wilson said: “We are bitterly disappointed with the loss in the final but this award for Sam is evidence that we have been playing a brand of rugby which highlights the talent we have in the squad.
“Sam has worked very hard in the past year on areas of his game and achieved a lot during this tournament. He should be extremely proud of receiving this well-deserved accolade.
“It is voted on by coaches, commentators, analysts and the general public so Sam has made an impression on people who have been watching this event extremely closely.”
