The Foxes sacked Ian Holloway on Friday following the side's relegation to League One, with Grayson's name immediately put in the frame by bookies and media pundits.
Grayson is a former Leicester player, spending five seasons at the club in the mid 90s.
He led Blackpool to promotion via the League One play-offs last season and kept the Seasiders in the second tier of English football this term - albeit only by two points.
"It is flattering to be linked with another job but it is pure speculation, that's all it is," Grayson told the Blackpool Gazette.
"I am fully focused on the summer ahead and getting the right players to Blackpool and trying to make sure that we survive once again in the Championship.
"All my plans are geared towards that and I have no thoughts for anything else."