The Nigerian will spend the remainder of the campaign with the Robins, who are currently battling relegation from the Championship, and is eligible to make his debut against fellow strugglers Fulham on Saturday.
Odemwingie, 34, has made only eight appearances for Stoke this season, six as a substitute, and will be out of contract this summer, so manager Mark Hughes felt it best he left now.
"Peter is a case in point. He was as far away from the first XI as he had been for some time and opportunities here from now until the end of the season would be few and far between," said Hughes. "We let him go because we couldn't give him the opportunities he felt his talent deserved and I was in agreement with that.
"It is not easy to keep senior players happy and if you can't even get them on the pitch and they are sat in the stand it becomes more of a problem.
"But if you have the opportunity to get good players in you have to get them into your club. At some point there will be good players in their own right who will have leave to make room for players coming in."
"Players that have ambitions to go to the top clubs may find themselves without options and set their sights differently and you find very good players become available to you," added Hughes. "Those players have a desire to come to the Premier League and we can benefit from that as other teams become viable options.
"We will always be in the market for players who can take you to the next level."
On the acquisition of Odemwingie, Bristol City coach Lee Johnson said: "I'm delighted we've been able to bring someone of Peter's quality in -- he'll provide us with experience and hopefully goals in one form or another.
"I'm looking forward to working with him and he'll be available for us at Fulham tomorrow."
Bristol City, who won League One last season, are currently 20th in the second tier, two points clear of the relegation zone with 10 games remaining.
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