The Nigeria international, 28, has joined from the Premier League side Everton.
"Yakubu is a tremendous signing for Leicester. He will bring pace, power and experience to the club," said the Foxes manager Sven-Goran Eriksson.
"He has captained his country, played in major competitions and is a first-class footballer who I am certain will help us to achieve our aims of moving up the npower Championship."
Sheffield United have signed the highly-rated left-back Joe Mattock on loan from West Bromwich Albion.
Mattock, 20, will play for the Blades until the end of the season. Mattock joined West Brom in 2009 after making more than 50 appearances for Leicester, having made his debut for the Foxes at 16.
Preston North End have signed Nathan Ellington and Amine Linganzi on loan until the end of the season.
Forward Ellington joins from Watford, with midfielder Linganzi joining from Blackburn Rovers.
The Premier League side Blackpool have confirmed an interest in signing the Barnsley winger Adam Hammill.
"His agent has done a good job and there is a clause in his contract which guarantees you can get him. We're not the only ones who know that, but we like the boy and we've had him on loan here," said the Seasiders manager Ian Holloway.