Holloway took charge at Home Park in the summer of 2006, having previously had spells in charge of Queens Park Rangers and Bristol Rovers.
"I just felt that I couldn't turn this down. I can't wait to get started," he said.
"I am going to be so enthusiastic because I love everyday of my life. This is a whole new challenge which throws me into a whole new ballpark.
"I feel like I have been acting in Coronation Street all my life and now I have been asked to do a different role."
The Foxes have also confirmed that caretaker manager Frank Burrows has left the club by mutual consent, but coach Gerry Taggart and goalkeeping coach Mike Stowell will continue in their existing roles.