The 25-year-old has been with the Llanelli-based side since 2010 and made 71 appearances, while also playing four times for Wales.
However, this will be his final season for Bois Sospan as he will join fellow Wales international Scott Williams in moving to Swansea.
Davies has penned a two-year deal with Ospreys and will battle with another Wales international, Gareth Davies, for the number nine jersey as Rhys Webb is leaving Ospreys for Toulon at the end of 2017-18 campaign.
Davies admitted it will be a wrench to leave his current club but believes it is the right thing to do at this stage of his career.
"It's been an incredibly hard decision to leave my boyhood club at the Scarlets where I've had a fantastic nine years at the club and leave many good friends," he said.
"However, having sat down a few times with [head coach] Steve Tandy, it was clear that moving to the Ospreys was the correct rugby move for me and will allow me to develop further as a player.
"I believe the Ospreys game plan will suit my style of play."