The newly promoted Premier League side have had an offer of £2.25 million accepted by the Blues, allowing the player to discuss personal terms yesterday.
Birmingham manager Lee Clark is confident that the transfer will go through without a hitch, with a medical expected in due course.
Davies began his career with Luton Town beginning an eight year spell in the West Midlands with West Bromwich Albion, who paid £3m for his services in 2005.
A loan move to Aston Villa followed in 2007, with the switch being made permanent a year later.
He joined Birmingham City after a loan spell with Leicester City, going on to make 100 appearances for the Blues.
The 28 year old has one year remaining on his contract at St. Andrews, but looks set to return to the top flight with Hull.