The 27-year-old, who finished last season on loan at Sheffield United before departing the Seasiders, has signed a one-year contract at Valley Parade.
Bantams manager Phil Parkinson told the club’s official website: “Steve is a very technical player with a great left foot. He has quality in his all-round game.
“He has played most of his career at Championship level and is still only 27 years old. There is still a lot of football years ahead for him. We have got ourselves a very talented player.”
Liverpool-born Davies began his career at Tranmere and then spent four years at Derby from 2008.
He moved on to Bristol City for one season in 2012 and was signed by Blackpool for £500,000 in July 2013.