The former Tranmere and Derby striker has signed a two-year contract with the Championship club with the option of a further12 months.
Davies completed a medial at Bloomfield Road on Thursday with the Seasiders paying an undisclosed fee for the 25-year-old Liverpudlian.
Bristol City were relegated from the Championship last season and the chance to remain in the second tier was a big draw for the player.
"No one has pushed Steven out the door. Like all players, they want to be playing at the highest level possible," said Robins boss Sean O'Driscoll.
"Blackpool came in with an offer that we felt was fair and he's decided it's a move he'd like to make. We wish him well for the future."
Davies made 38 appearances for the Robins in his one season at Ashton Gate and was the club's top scorer with 13 goals.