Clarke, 33, has signed a contract with the Sky Blues that will keep him at the Ricoh Arena until the end of the current 2016/2017 campaign.
The experienced centre half made 35 appearances in total for City after arriving at the club back in July 2015.
The form of current defensive pairing Romain Vincelot and Nathaniel Knight-Percival, however, has seen Clarke feature only four times for the Bantams this season, with each appearance coming in cup ties.
Speaking about Clarke's departure, City boss Stuart McCall said: "We are certainly losing a popular member of the dressing room.
"He is a fantastic professional - he has just been unfortunate this season if I'm being honest.
"In pre-season this summer he was probably our best defender but he got a calf injury just before the first game.
"That meant us putting Romain in defence instead, and we've obviously been very pleased with him since he's gone there.
"There has also been strong competition for Nathan to contend with from the likes of Rory McArdle and Matthew Kilgallon.
"Quite rightly so, Nathan wanted to try and secure himself first team football.
"Coventry are getting a tremendous professional and I'm sure he will do everything he can to help keep them in the division."