The Australia international keeper, who has made over 500 Premier League appearances for Chelsea, Middlesbrough and Fulham over 18 years, joins the Foxes on a contract that runs until June 2016.
Leicester’s first-choice keeper Kasper Schmeichel has been ruled out for six weeks with a foot injury so the 42-year-old will compete for a first-team place with Ben Hamer and Adam Smith.
Schwarzer told Sources: “Over a week ago the club made an enquiry with Chelsea asking if I was available and I was given permission to speak to them.
“Over the last couple of days everything was agreed and it was all very straight forward.
“At Chelsea I definitely wasn’t going to play unless something major happened while at Leicester they have got a lot of good keepers so there is going to be some good competition. I want to put some pressure on and hopefully perform well enough to play.
“Leicester are a good club but probably lacking a bit of experience in the Premier League and obviously I have got that, and I hope I can bring that along and really help the boys out.
“The club has turned the corner in the last couple of games and played really, really well and got some good results.
“I am coming there with a lot of hope that we can continue that and with my experience hopefully we can take it even further.
“I know Nigel (Pearson) well from when we played together at Middlesbrough way back then and I know what he is like as a player and a person. He’s a fighter all the way and everyone speaks very highly of him at the club.
“I am really excited about the challenge and doing my very best for the club.”
Schwarzer joined Chelsea in 2013 and played 12 games last season, including one substitute appearance when replacing the injured Petr Cech in the first leg of the Champions League semi-final against Atletico Madrid in April.
But this season the veteran goalkeeper found himself third choice behind Thibaut Courtois and Cech and has not played for the west London club since the final day of last season.