Stansfield moves to Birmingham for a fee rising to £10m, a record for League One.
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The striker has penned a seven-year contract with the Blues.
I am absolutely buzzing. It has been a long time coming, I think," said Stansfield.
"When I left, from the awards evening, the reaction from all the fans, even though it was a really tough season for Birmingham as a club and it didn't end the way we wanted it to end, I thought it was only right for me to come back here and take on this next challenge, and be part of such an amazing club and amazing project."