The 19-year-old winger has agreed a four and a half year contract with Leicester who are second in the table after an outstanding first half of the season.
"It’s been my dream to play in the Premier League since I started playing football so I’m very happy to join the club," Gray said.
"It’s a great club. The facilities are great and for a player like me it’s an ideal place for me to improve."
Leicester, who narrowly avoided relegation last season, are two points behind Premier League leaders Arsenal after 20 games and coach Claudio Ranieri is looking to improve his squad in a bid to win their first ever English top-flight title.
"You can see how well the team has been doing this year and I watch a lot of football so I can see that the way Leicester City play suits my style," Gray said.
(Reporting by Ed Osmond, editing by Alan Baldwin)
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