Stephen, who has made only one first team appearance this campaign and whose contract expires at the end of this season, will hold talks with City on Wednesday.
"We have accepted an undisclosed offer from Birmingham City and Stephen will travel to Birmingham tomorrow for talks," revealed director of football David Pleat.
The midfielder, who joined the club as a trainee in July 1994 and signed professional forms under a year later, is a graduate of the FA National School of Excellence and made his first team debut in August 1997 against Manchester United.
He has since made over 100 senior appearances for the club, but was absent for the opening stages of the current campaign with an Achilles injury sustained in the summer.
Spurs have agreed a fee with Birmingham City for the transfer of Stephen Clemence to St Andrews.