The Jamaica international, 29, had been left training alone at Bodymoor Heath after Aston Villa's attempt to move him to Hull City fell through late in the window, with Unai Emery no longer able to find a role for the winger in his plans.
Olympiacos moved decisively to beat Greek rivals AEK Athens to his signature once the Premier League deadline had passed, with reports indicating the Greek champions are paying a fee in the region of £3.4 million.
Bailey has signed a contract running until June 2029, with club president Evangelos Marinakis continuing a heavy summer of spending in Piraeus. Manager José Luis Mendilibar already has first-hand knowledge of the winger, having faced him from the opposite technical area when Bailey started against Olympiacos for Villa in their run to the Europa Conference League semi-final in 2024.
Villa signed Bailey from Bayer Leverkusen for around £30 million in the summer of 2021, and he went on to make 163 appearances in all competitions, scoring 23 goals and providing 25 assists. His time at the club was disrupted by recurring injury problems, and last season he was loaned to Roma, only for that arrangement to be cut short in January when he returned to Villa Park without ever settling in Serie A.
Back in the Premier League for the second half of the campaign, Bailey made 13 appearances and registered a single assist as he struggled to force his way back into regular contention. He leaves England with 41 caps and seven goals for Jamaica, for whom he helped reach the semi-finals of the CONCACAF Gold Cup on two occasions.
At his best, Bailey was a key figure in Villa's rise under Emery, scoring ten Premier League goals in the season the club finished fourth and qualified for the Champions League.
He went on to become the second Jamaican player to score in the competition, netting against Club Brugge, and the first to register a Champions League assist, teeing up Marco Asensio in the same fixture.
Olympiacos had been considering Bailey alongside other wide-attacking targets after manager Mendilibar identified reinforcements as a priority, and the move represents a surprise late twist in a saga that only became public in the final days of the window. For Villa, his exit clears space and wages after a frustrating chapter that had run its course.