ESPN's Adrian Wojnarowski reported the move, which will clear up a roster spot for the Raptors in time for the 3 p.m. ET deadline.
The Raptors ultimately did not trade Kyle Lowry ahead of the deadline, so it's possible they'll wind up filling that roster spot with a buyout player or someone from the G League.
Davis averaged 6.9 points and 1.1 rebounds in 34 games with the Raptors. The second-year guard shot 41.4 percent from the floor overall and 36.1 percent from deep, so he should bring some floor spacing and youth to the Kings roster.
Sacramento was largely quiet at the deadline, with Harrison Barnes and Buddy Hield, two players oft-mentioned as trade targets, staying put.
Davis represents an interesting buy-low option for the Kings from a basketball perspective, but he also has off-court concerns.
In October, Davis was arrested and charged with aggravated harassment, two counts of assault, criminal mischief, attempted assault, harassment and endangering the welfare of a child after allegedly assaulting his girlfriend in front of her son. In February, the district attorney dropped all charges apart from endangering the welfare of a child and criminal mischief, which will be dismissed after Davis pays a $1,000 fine and if he stays out of legal trouble for one year. He has not faced discipline from the NBA.