The 24-year-old defender joins the Foxes in a deal said to be worth £15m, with a further £5m in add-ons.
He has put pen to paper on a five-and-a-half-year contract that will keep him at the King Power Stadium until 2028.
West Ham United and Wolverhampton Wanderers both were credited with an interest in the Australia international, but Leicester have now won the race.
Souttar has made 70 appearances for the Potters across all competitions, including 7 games so far in 2022-23.
The centre-back make his debut for Leicester City against a Premier League action against Aston Villa on Saturday.
BREAKING! Leicester have signed Harry Souttar from Stoke on a permanent deal.
The 24-year-old Australia international joins on a five-year deal ✅ pic.twitter.com/IiTDQriJya
— Sky Sports News (@SkySportsNews) January 31, 2023