The 21-year-old winger had moved to the Division One side on a season-long deal from the Premiership champions.
He was travelling to Vicarage Road on Saturday morning to play in the opening game of the season against Coventry City.
He was involved in a car accident on the M40 motorway and police later identified the young Old Trafford starlet.
Watford immediately postponed their game with The Sky Blues, and delayed the confirmation of Davis's tragic death so that his family could be told of the news.
Davis was well thought of by those in the know at Old Trafford, and it was hoped his season with Watford would give him the experience need to make a real impact at United.
The news is sure to come as a shock to everyone at both Watford and Manchester United as he was a youngster with immense promise.
Sir Alex Ferguson was devastated about the news that one of his young stars had been killed.
"You could not meet a nicer and more bubbly character than Jimmy Davis," said Ferguson.
"He was a player with real potential, that's why we sent him to Watford this season. At 21 he had great promise. We are all really sad. It's terrible news."
A statement from United said: "Everyone at Manchester United is devastated to hear about Jimmy's tragic death.
"We send our sincere condolences to his family and many friends. He will be sadly missed."
