The 20-year-old was a part of the Citizens' youth setup, before making his way into the first team in August 2015. He impressed in Manuel Pellegrini's final season at the Etihad but saw his first team opportunities were limited under Pep Guardiola's guidance.
Iheanacho's chances of making into the first team suffered a blow when Gabriel Jesus arrived at the club earlier in January. The former Barcelona and Bayern Munich manager had earlier hinted that City will allow the Nigerian international join the Foxes. He has now left City and sealed a switch to the King Power Stadium
A statement on City's official website read, "Kelechi Iheanacho has joined Leicester City on a permanent deal. Everyone at Manchester City wishes Kelechi all the best with his new challenge."
Leicester have confirmed Iheanacho has joined them for an undisclosed fee, but the Guardian reports that City will pocket £25m ($32.8m) from the forward's sale. The African attacker has signed a five-year deal with the 2015/16 Premier League winners.
Iheanacho admitted the conversation with Leicester manager Shakespeare convinced him to join the Foxes.
"It feels good and I'm happy to be part of this team. I know the ambition of the team and speaking with the manager, he let me know what I need to do – to help the team achieve what they want. I was convinced and I'm happy to be here," Iheanacho told Leicester's official website.
"I was happy speaking with the manager, knowing what the team wants. It gives me more confidence that I will fit in this team and hopefully I'll achieve a lot."
Iheanacho was also a target for Tottenham Hotspur, according to the Leicester Mercury. The north London club entered the race in signing the attacker and were hoping to beat Shakespeare's side in landing him. However, Tottenham have failed to beat Leicester as Iheanacho completed a switch to the King Power Stadium.