Davies, 28, joined the Bantams on a one-year deal last summer and scored five goals in 25 league appearances.
The Bantams have also released defenders Alan Sheehan, 29, and Christopher Routis, 26, with the duo agreeing deals with Luton and Ross County respectively.
Midfielder Billy Knott, 23, has been let go after making 64 league appearances in two seasons.
Bradford City have released striker Steven Davies.