Waters comfortably progressed through the first two segments of qualifying, falling just one hundredth of a second short of Davison in Q2.
He then turned the tables on his Dick Johnson Racing rival in Q3, a rapid 1m01.998 – the first 'one' of the weekend – securing pole by just six one hundredths.
That came on the first lap of his final run, despite Waters having initially planned to wait until the second lap to attack.
"It was a cool lap. I knew we had a one it," said Waters.
"I thought I was going to do it Lap 2, but then I had half a crack and I was up, and I thought, 'do I back off or not?'.
"Lucky I didn't back her off and got the lap done. The car speed has got better and better with each session."
Davison will start on the outside of the front row ahead of Chaz Mostert and Anton De Pasquale.
Andre Heimgartner was fifth fastest, making him the best-placed Kiwi, while Scott Pye comfortably led the way for Team 18, qualifying a full 12 spots clear of Mark Winterbottom.
Shane van Gisbergen could only manage seventh on the grid, a spot clear of teammate Broc Feeney, as James Golding was the surprise of the session, the PremiAir Racing driver cruising into Q3 before qualifying ninth.
James Courtney rounded out the best 10.
Nick Percat, meanwhile, was the unlucky driver left on the Q3 bubble, a gamble on used rubber not paying off as he ended up 11th.
