Councillor Davies was voted as the Labour leader when she defeated Ann Shackleton by 35 votes to 33 at the group’s annual general meeting earlier this month.
She was formally chosen as leader of the council at the meeting on Tuesday evening, where Dr Ann Jaron said she will retire from her role as a GP in August to concentrate on her civic responsibilities after being was elected as mayor.
Councillor Suzanne Hartwell will be deputy mayor for the next year.
Councillor Davies is the third leader for Sandwell Council in a matter of months after Steve Trow stepped down in the immediate aftermath of the local elections.
He in turn had replaced Steve Eling, who was among several borough councillors to be suspended or thrown out of the party by Labour’s National Executive Committee.
At the meeting, Councillor Davies said: "It’s a huge privilege and an honour for me. I’ve spent all of my adult life working public service in one way or another. All I’ve ever really wanted to do is make a difference in people’s lives.
"That’s what will drive me as Leader of the council, my job and our jobs as elected members is to improve the lives of the people of Sandwell."
It comes after disgruntled councillors formed a new party to opposed Labour, who hold 71 out of 72 seats on the council.
Former Labour members Caroline White and Bill Cherrington will head the United Sandwell Group, which has been formed to “stand up for what’s right” and challenge “corruption” in the Labour group.
Councillor White had said in a statement: “I cannot support Yvonne Davies as leader. She has been a disruptive influence in the council for many years.
“I can have no confidence in her as a leader or in the cabinet I fear she will choose.”