The 28-year-old former Yeovil, Nottingham Forest and Brighton midfielder, had his contract with Northampton terminated by mutual consent earlier this week.
Davies, whose one Wales cap came in a friendly against Trinidad and Tobago in 2006, told the club's official website: "I'm over the moon it's all sorted and now I'm chomping at the bit to start training on Monday.
"I didn't kick a ball in the second half of last season after the change of manager which was frustrating and as a footballer I'm hungry and my desire is to play football.
"I've kept myself fit and now I'm just buzzing to get on the pitch and play some football. It's about enjoying my football and my main goal is to be playing football with a smile on my face - when I do that I'm a good player."