The 20-year-old striker spent the whole of last season with Nigel Pearson's side, making 42 appearances and scoring 12 goals to help the Foxes reach the Championship play-off semi-finals.
"As soon as I came to the club I knew it was a good team; Matt Oakley, Steve Howard and Richie Wellens have good experience and there is a good balance with young players like Jack Hobbs, Kingy and Matty Fryatt," Waghorn told Leicester's official club website.
"It's a really good club; they will have good players for many years to come.
"The lads were always just a phone call away, so it has been excellent from day one.
"It's a fantastic club and I have nothing but praise for Leicester City, they have been excellent to me."