The hosts were gifted the lead after just two minutes when City’s Sam Williamson nodded a long clearance back to oncoming keeper Kasper Schmeichel but the header flew over Schmeichel and into the net.
City’s heads went down after that early blow, although Schmeichel gathered at the second attempt after a shot by Davies.
The Blues’ best chance of the half fell to 15-year-old Danny Sturridge from an Ashley Grimes cross but his header went wide, while Grimes had a thunderous 25-yard shot palmed away by former City schoolboy keeper Wayne Hennessey, now a Wales youth international.
But City, captained by new England U20 international Nedum Onuoha, were finally beaten by an industrious Wolves side when Schmeichel parried a Chris Cornes shot and Gareth Musson followed up to complete the scoring in the 69th minute.
Hennessey then saved from Grimes and Sturridge as City battled for a lifeline late on.
Wolves: Hennessey, Little, Rafferty (Collins 46), Taylor, Riley, Davies, Musson (Bennett 76), Gleeson, Stewart, Cornes, Fitzpatrick.
Subs: Shepherd, Askey, Ferren.
City: Schmeichel, Wallwork (Ward 63), Williamson, Richards, Onuoha, Williams (S Logan 69), Etuhu, Johnson, Grimes, Miller, Sturridge.
Subs: Matthewson (gk), McGinlay, Russell.
Attendance: 561.