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The duo, both of whom were amongst the substitutes for the FA Cup defeat at Wigan on Monday night, start in midfield in the last-16 of the U19 competition.
Lukas Nmecha, who has also been training with the first team squad in recent weeks, returns to captain the side.
Davies has made seven changes to the team that started the final group stage game against Shakhtar Donetsk in December, with Ed Francis, Matt Smith and Rabbi Matondo the only players to retain their place.
Daniel Grimshaw starts in goal and is protected by a back three of Eric Garcia, Joel Latibeaudiere and Francis.
Smith and Tom Dele-Bashiru anchor midfield with Ian Poveda joining Diaz, Foden and Matondo in a quartet behind Nmecha.
The substitutes are: Demeaco Duhaney, Pawel Sokol, Iker Pozo, Felix Nmecha, Luke Bolton and Nabil Touaizi.
City welcome a high-flying Inter side, who currently sit second in the Campianto Primavera 1, with 12 wins and four draws from 20 matches.
Davies’ youngsters can expect to meet a stern defence, with the Milan side conceding less than a goal a game in their domestic campaign.
They also boast three Italy U19 internationals in their ranks, with defender David Bettella and strikers Andrea Pinamonti and Nicolo Zaniolo all in the starting line-up.
Latest PL2 clash...
Our U19s have been draw at home and will welcome the Italian outfit to the Academy Stadium.