The 28-year-old Nigerian becomes Sven-Goran Eriksson`s third signing this month, following Ben Mee and Sol Bamba to the Walkers Stadium.
"Yakubu is a tremendous signing for Leicester. He will bring pace, power and experience to the club," Eriksson told Leicester`s official website.
"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.
"We are delighted that he is joining us and I`m sure that the supporters will enjoy watching him."
Yakubu, who cost Everton £11.25million in 2007, has fallen down the pecking order at Goodison Park and has scored just one goal in 15 appearances this season. However, he has regularly been among the goals during his time in England with Portsmouth and Middlesbrough.