Longtime receivers coach Tyke Tolbert and special teams coordinator Brock Olivo also were let go, according to reports.
The Broncos ranked 17th in points per game at 18.1, were 20th in passing offense and were last in red zone percentage at 39.6. Denver's offensive line also allowed 52 sacks, which tied the Arizona Cardinals for third worst total in the league.
Davidson, 50, joined the Broncos after the team ranked 23rd with 40 sacks allowed in 2016 and 19th with 39 sacks allowed in 2015.
Davidson joined first-year head coach Vance Joseph's staff and was reunited with offensive coordinator Mike McCoy. Davidson was the offensive line coach for the final season of McCoy's four-year tenure with the San Diego Chargers, whose offensive line permitted 36 sacks last season.
He also worked with McCoy in 2008 with Carolina, which won the NFC South title with an offensive line that allowed one sack every 21.7 pass plays
Besides working with the Broncos and Chargers as offensive line coach, Davidson also was an offensive line coach for the Cleveland Browns in 2005 and the Minnesota Vikings from 2011 to 2015.
Davidson was a fifth-round draft pick of the Broncos in 1990 out of Ohio State. He started 14 regular-season games at left tackle in 1991 and 16 regular-season games in 1992 at left guard, but knee surgery ended his tenure playing for the Broncos.
McCoy lasted 10 games as Denver's offensive coordinator and replaced by Bill Musgrave on an interim basis.
Musgrave is expected to stay on as offensive coordinator and multiple outlets reported that former UTEP head coach Sean Kugler may interview for the position.
Kugler was the offensive line coach for the Pittsburgh Steelers from 2010 to 2012 before going to UTEP. Kugler was fired six games into this season after posting an 18-36 record.
Tolbert was Denver's wide receivers coach since 2011 when the Broncos made the playoffs with Tim Tebow. Olivo was in first season as special teams coach