The 26-year-old, who leaves Bloomfield Road for an undisclosed fee, has signed a contract until 2025.
Slask Wroclaw currently sit 10th in the top tier of Polish football.
Gretarsson, an October 2020 signing, made just 19 appearances during his time with the club.
The move will officially go through at the weekend, when the Polish transfer window officially opens.
"The club would like to thank Daniel for all his efforts in tangerine and wish him the very best of luck for the future," the Seasiders said in a statement.
Gretarsson, an Iceland international, made the move to Blackpool from Norwegian side Aalesunds.
He made 15 appearances during his debut season, yet missed the back end of the Pool's promotion-winning campaign with a shoulder problem.
The centre-back found himself well down the pecking order this term and only made another four appearances.
Gretarsson becomes the latest player to leave Blackpool this month, joining Teddy Howe, Demetri Mitchell and Oliver Sarkic.
Joe Nuttall, meanwhile, is also set to wrap up a permanent move to Scunthorpe United.
However, it's understood the Iron must move on a player before they confirm Nuttall's signature.
Thanks for reading. If you value what we do and are able to support us, a digital subscription is just £1 for your first month. Try us today by clicking here