"Mike brings a tremendous amount of energy and success to our program," said interim athletic director Richard Margison. "His ability to recruit, play a demanding schedule and his style of play have proven to be a winning formula that I know our fans will appreciate and support."
Davis -- a native of Fayette, Ala., who played basketball for the Crimson Tide -- succeeds Mike Anderson, who left UAB to become head coach at Missouri.
The Blazers finished 24-7 in 2005-06 and lost to Kentucky in the first round of the NCAA Tournament.
Davis coached the Hoosiers for six years, guiding Indiana to a 115-79 record, after taking over for Bob Knight prior to the 2000-01 season. Under Davis, the Hoosiers played in the post-season five times and reached the NCAA championship game in 2002 campaign.
Davis resigned from Indiana in February, but stayed on the job until Indiana was eliminated from this year's NCAA tournament with a second-round loss to Gonzaga.