The Jamaica winger began his career with Bristol City and, following a loan spell, he made the permanent move to Craven Cottage in January 2020.
De Cordova-Reid went on to appear 209 times for London club Fulham. He has also been capped 33 times for Jamaica and represented the Caribbean island at the recent Copa America.
"Turning up here was a special moment, looking around and seeing the infrastructure," De Cordova-Reid told Leicester's website. "It's got that wow factor. It feels nice. I'm delighted to be here and I can't wait to get going.
"I had a good chat with the manager, he told me the vision of the club. I spoke to him a few times and he was very clear in what he wanted and what he saw in me.
"He believes in me and it's a perfect fit for me."
Meanwhile, former Brentford midfielder Shandon Baptiste has joined relegated Luton.
The 26-year-old told the Hatters' website: "I feel like Luton is the right place for me. Watching the club play last season, it was clear that something big was happening here and I want to be a part of it.
"There are good players and a good manager here so I'm hopeful that we can do big things together.
"I've had a lot of injuries during my career, but I feel like I've passed that now and hopefully I can just look forward to doing great things in the Luton shirt."
