The 30-year-old, who played under new Foxes manager Sven Goran Eriksson during his time at Eastlands and was handed his England debut by the Swede, was a free agent after leaving Turkish side Ankaragucu.
Vassell is the third signing Eriksson has made since he took over at the Walkers stadium earlier this month, with the former Lazio, Roma and Benfica chief already recruiting defenders Curtis Davies and Kyle Naughton on loan deals from Villa and Tottenham respectively.
Vassell, who was capped 22 times by England, scoring six goals, started his career with Aston Villa before signing for Manchester City in a £2million deal in the summer of 2005.
However, he has been without a club since leaving Ankaragucu in May and is at least two weeks away from being match fit.
Eriksson's recruitment strategy shows no sign of letting up with out-of-favour Blackburn striker Jason Roberts the latest to be interesting the City manager.