Assistant Managers Craig Shakespeare and Steve Walsh have also agreed new deals to June 2017.
Under Nigel's leadership, the Club has made enormous progress over the last two-and-a-half years and was last month promoted to the Barclays Premier League, as champions of the Football League, following one of the most successful seasons in its long, proud history.
Leicester City Vice Chairman Aiyawatt Srivaddhanaprabha said: "From the first day I met Nigel, I knew he was the man to take us into the Premier League and I am delighted that he has been able to help us deliver that for our fans.
"He is a man of fine principles, a great leader and he believes in our long term vision for Leicester City, while his qualities in coaching, motivation and player development have been evident in our success on the pitch.
"Nigel is the perfect fit for our Football Club and his ambitions, both short and long-term, match ours."
Leicester City First Team Manager Nigel Pearson said: "I have always seen my long-term future, and that of my staff, at Leicester City. On the back of the success we have worked so hard to achieve, I have always been confident that my future would remain here.
"I feel very proud to be the manager of a Club with genuine ambition, a clear direction in which it wants to go and loyal owners that are prepared to support its development."
Nigel Pearson will lead Leicester City into the Premier League on the back of a record-breaking season in 2013/14, which saw his side win the Foxes’ first ever Football League title with 31 victories and 102 points – both Club records.
Now in his second spell as manager, Pearson, 50, boasts the best win percentage (51.41 per cent) of any manager in the Club’s 130-year history. Between 2008 and 2010, he led the Club to immediate promotion from its first ever season in the third tier of English football, before narrowly missing out on successive promotions to the top flight following defeat to Cardiff City in the Championship Play-Offs a year later.
After an 18-month spell with Hull City, he returned to King Power Stadium in November 2011 under the Club’s new owners, King Power International, and began a journey that would ultimately lead Leicester City back to the Premier League after a 10-year absence.
Aided by the expertise of Craig Shakespeare and Steve Walsh – his assistants overseeing coaching and recruitment respectively – Nigel steadily moulded a squad of hungry young players blended with valuable experience, which reached the play-offs in his first full season back at the helm, but were denied a place at Wembley in heart-breaking circumstances at Watford in the semi-finals.
Galvanised by the experience and strengthened by some seasoned new recruits last summer, the Foxes responded remarkably and were promoted automatically as Championship champions 12 months later – nine points clear of their nearest rivals.
Pearson’s squad will return for pre-season training in early-July, as they begin preparations for the Club’s first top-flight season in a decade, starting at home to Everton on Saturday 16 August.