Leicester won the English Championship (second tier) last season and are back in the top flight for the first time since 2004. Brighton finished sixth but were beaten in the promotion playoffs by Derby County.
The Argentine, who turns 28 this weekend, scored 16 goals for Brighton in all competitions last season and the fee could rise to 10 million pounds based on appearances.
Ulloa joined Brighton on a four-and-a-half-year deal from Spanish side Almeria for 2 million pounds in January 2013.
He told the Brighton website (www.seagulls.co.uk): "I wasn't thinking about leaving Brighton.
"I would have loved to reach the Premier League with Brighton, and we came close twice in the two seasons after I joined the club - but having that chance to play at the top level now is one I wanted to take."
Leicester manager Nigel Pearson told his club's website (www.lcfc.com): "We identified Leo as a player that could help us move forward quite some time ago.
"He complements the forwards we already have very well and his attributes broaden the options available to us, which will be important this season. I’m delighted we’ve been able to add him to the squad."
The most Leicester had previously paid for a player was 5.5 million on Ade Akinbiyi, who they bought from Wolverhampton Wanderers 14 years ago.
Brighton's previous record sale was 1.5 million pounds for three players, Bobby Zamora, who went to Tottenham Hotspur in 2003, Adam Virgo, sold to Celtic in 2005, and Elliott Bennett, transferred to Norwich City in 2011.
(Reporting by Mike Collett, editing by Ed Osmond)
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