After a strong opening two rounds in his bout with Jeremy Stephens, Davis was knocked out midway through the third round.
The 37-year-old Davis has been one of the most successful former professional boxers to move into MMA. He first came to the public's attention on season two of The Ultimate Fighter, but was released shortly after losing in the TUF 2 Finale.
After a strong run on the regional MMA circuit, Davis returned to the UFC in Oct. 2006, and had been with the promotion since then. Fighting as a welterweight, Davis captured six straight victories in the UFC before suffering his first loss in 2008.
Starting with a split decision loss to Dan Hardy in June 2009 though, Davis has lost four of five fights.
Prior to losing to Stephens, he suffered a third round technical submission defeat to Nate Diaz in a bout that won Fight of the Night honors at UFC 118.
Cavallaro said Davis would continue on with his career and hope to string together a series of wins and return to the UFC as he did once before.
"I spoke to Marcus and he'd dedicated," he said. "He felt good in the fight. He retained his power. It's one thing if he looked like s---, we might be having a different conversation. But this is what he does, and he can't wait to get back in there again."