The 20-year-old joins the National League side until the summer of 2024, with two years left on his current deal.
City signed Clarke from Peterborough United in 2021 after he impressed in League One, but has struggled for a first-team breakthrough at Carrow Road.
He joined League Two Walsall this time last year, but was recalled before the end of the summer transfer window due to a lack of playing opportunities.
Daggers manager Ben Strevens told official club channels of Clarke: “He’s a player we’ve known about for a while, and as soon as we knew it was a possibility we wanted to get him into the club.
“Flynn can cover a load of the attacking areas and we believe he will add goals and assists to the group. He’s come here to develop his game, and he’s fitted in straight away so we are delighted to have him on board with us.”
Clarke will wear the number 14 shirt for the Greater London club.
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