The 17-year-old becomes the UK's first male professional footballer to come out as gay since Justin Fashanu.
He is the first active male professional UK footballer to come out as gay.
Daniels said in a statement publish on Blackpool's website: "This season has been a fantastic one for me on the pitch. I've made my first-team debut, scored 30 goals for the youth team, signed my first professional contract and shared success with my team-mates, going on a great run in the FA Youth Cup and lifting the Lancashire FA Pro-Youth Cup.
"But off the pitch I've been hiding the real me and who I really am. I've known my whole life that I'm gay, and I now feel that I'm ready to come out and be myself.
"It's a step into the unknown being one of the first footballers in this country to reveal my sexuality, but I've been inspired by Josh Cavallo, Matt Morton and athletes from other sports, like Tom Daley, to have the courage and determination to drive change.
"In reaching this point, I've had some of the best support and advice from my family, my club, my agent and Stonewall, who have all been incredibly pro-active in putting my interests and welfare first.
"I have also confided in my team-mates in the youth team here at Blackpool, and they too have embraced the news and supported my decision to open up and tell people.
"I've hated lying my whole life and feeling the need to change to fit in. I want to be a role model myself by doing this.
"There are people out there in the same space as me that may not feel comfortable revealing their sexuality. I just want to tell them that you don't have to change who you are, or how you should be, just to fit in.
"You being you, and being happy, is what matters most."
And in an interview with Sky Sports, Daniels said: "It's been quite a crazy year. I'm 17. I've signed a professional contract. I've scored 30 goals this season and I've just made my first-team debut in the Championship, coming off the bench against Peterborough.
"And now I have decided to come out. Everything has happened at once but it feels right. When this season started, I just wanted to prove myself as a player. I think I have.
"So this was the one last thing in my head that I knew I needed to do. Now it's out, and people know. Now I can just live my life how I want to and you know what? It's been incredible."
Daniels continued: "The subject of being gay, or bi or queer in men's football is still a taboo. I think it comes down to how a lot of footballers want to be known for their masculinity. And people see being gay as being weak, something you can be picked on for on the football field.
"It's an easy thing for people to target. The way I see it is that I am playing football and they are shouting stuff at me, but they are paying to watch me play football and I am living my life and making money from it. So shout what you want, it's not going to make a difference.
"I won't stop people from saying that stuff, I just need to learn how to not let it affect me.
"I am hoping that by coming out, I can be a role model, to help others come out if they want to. I am only 17 but I am clear that this is what I want to do and if, by me coming out, other people look at me and feel maybe they can do it as well, that would be brilliant."
A statement from the Professional Footballers' Association read: "We are extremely proud of Jake and have been working with him and his club. He has the complete support of everyone at the PFA.
"The PFA represents an incredibly diverse group of players across both the men's and women's games. The whole football community must continue to work to make our game an environment where all those involved feel safe and supported, and where they feel comfortable when choosing how to tell their own stories.
"Our message to anyone in the game who is thinking about a similar, extremely personal decision is simple - whatever you decide, and however you choose to move forward, we are here for you.
"As your footballing family we will give you all the support you need, whenever you need it."