The 23-year-old agreed personal terms and underwent a medical at the Withdean Stadium on Monday morning.
The fee was agreed on Friday for last season's top scorer and he did not feature in Saturday's 0-0 draw with Swindon.
Davies is determined to play his part in helping the Seagulls soar into the Championship.
He told the Brighton official website: "Anybody is capable of beating anybody in this league - that's one of the reasons I've come here.
"Brighton can definitely push for the Championship as a football club. They've been there before and I don't see why they can't get there again."