The 34-year-old had been without a club since being released by the Italian giants over the summer, which ended a decade-long spell at the San Siro in which he helped Inter win several trophies.
But the Foxes announced in a statement on Thursday evening: "Leicester City Football Club is delighted to announce the signing of Esteban Cambiasso on a one-year deal."
Cambiasso had been heavily linked with a move to the Barclays Premier League newcomers and his signing will add much needed experience to their midfield.
He made 52 appearances for Argentina, scoring five times, before retiring from international duty in 2011, although it is with Inter where he excelled.
He was integral to the treble-winning side of 2010, where Inter lifted the Serie A, Coppa Italia and Champions League, while he made over 300 appearances for the side after moving to Italy from Real Madrid in 2004.
However, he was deemed surplus to requirements at Inter over the summer, despite making 32 Serie A appearances last season, joining fellow veterans Javier Zanetti, Walter Samuel and Diego Milito out the door.
Cambiasso had also been linked with a move back to his homeland with River Plate, while Leicester's Premier League rivals Tottenham were also rumoured to be interested.
However, he will now ply his trade at the King Power Stadium, where he will wear the number 19 shirt.
It is not yet known whether he will be eligible to make his debut against Arsenal on Sunday.
Source : PA
Source: PA