Specter had also faced a tough challenge from Pat Toomey, a conservative rival, in a forthcoming senate primary polls ahead of a 2010 election.
Recent polls said that Specter, 79, was losing to Toomey and would fare better as a Democrat.
Specter, who faced conservative anger over his vote in favour of Obama's nearly $787bn economic stimulus package, denied that he would rubber-stamp Democratic legislation.
"My change in party affiliation does not mean that I will be a party-line voter any more for the Democrats that I have been for the Republicans," said Specter, who was first elected in 1980.
Harry Reid, the Democratic senate majority leader, praised Specter as a "a man of honour and integrity and a fine public servant" and welcomed him to the party.
"I welcome Senator Specter and his moderate voice to our diverse caucus, and to continuing our open and honest debate about the best way to make life better for the American people," Reid said in a statement.
But Michael Steele, the Republican party chairman, denounced the decision and said the party would strive to beat him if he becomes the Democratic standard-bearer in the Pennsylvania senate race.
Specter "didn't leave the GOP based on principles of any kind. He left to further his personal political interests because he knew that he was going to lose a Republican primary due to his left-wing voting record," he said.