Davies returns from hamstring trouble to reform his midfield partnership with Blues centre Jamie Roberts, who switches to outside centre.
Halfpenny has recovered from an ankle injury to make his first start in this year's competition and replaces Morgan Stoddart on the win who drops to the bench.
"This is a crucial game for us as a win will keep us in the Championship mix and take us into that final round with everything still to play for,"said head coach Warren Gatland.
"But it is also a big game for Ireland who are in a similar position to us going into this match."
Ospreys scrum half Mike Phillips and his regional team-mate Ryan Jones will both win their 50thcaps. Jones takes his place at No8 in an unchanged back row with the coaches keeping faith with the entire pack for the third fixture in a row.
"The forwards had a tough day at the office in Italy and we were not at our very best so we are looking for a step up in performance this weekend,"said Wales assistant coach (forwards) Robin McBryde.
"Ireland will be tough, they have a well drilled set piece game, are good around the field and are strong defensively.
"They bring intensity to the breakdown area which is always so crucial in these big games and it will be up to us to match them if we are going to be able to provide a platform for our exciting backs to play.
"The debate at fly half will continue long after the Championship is over, but we have gone for James (Hook) on this occasion. James provides a running threat and we will be looking for him to show he can control the game as well and help us play in the right areas.
"Leigh (Halfpenny) had a good run out for the Blues at the weekend, we know all about his pace and what he offers around the field as well as being solid under the high ball and giving us a long range kicking option. Morgan (Stoddart) misses out, but he has done nothing wrong and we know he can be relied on if we need him from the bench.
"We also have a vast amount of experience in Stephen (Jones) and Dwayne (Peel) to call upon if necessary. Both have proved in the past that they can come on and make an impact and neither will let us down."
WALES:Lee Byrne, Leigh Halfpenny, Jamie Roberts, Jonathan Davies, Shane Williams; James Hook, Mike Phillips; Paul James, Matthew Rees (captain), Craig Mitchell, Bradley Davies, Alun Wyn Jones, Dan Lydiate, Sam Warburton, Ryan Jones
REPLACEMENTS: Richard Hibbard, John Yapp, (2 from: Rob McCusker, Andy Powell, Jonathan Thomas), Dwayne Peel, Stephen Jones, Morgan Stoddart