Los Blancos are reported to have "reignited" their interest for the 23-year-old after their Champions League final victory over Borussia Dortmund, with the LaLiga club looking to reinforce their defence this summer.
Davies was previously linked with a switch to the Santiago Bernabeu throughout last season, but after their interest cooled, Bayern have made progress in signing him to a new contract at the Allianz Arena, and he is said to be leaning towards staying in Germany.
New Bayern Munich manager Vincent Kompany is keen to keep the Canada international as part of his squad for next season, and reportedly spoke about him before accepting the role.
Davies is expected to take part at the Copa America later this month, with Canada taking on Lionel Messi and Argentina on June 21.
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