The Foxes boss steered his side to promotion back to the Premier League last season and has been rewarded with a fresh deal at the King Power Stadium.
Pearson, whose current deal was due to expire in the summer, has enjoyed great success at Leicester, securing the Championship and League One titles during two spells at the club.
He left Hull City to rejoin the East Midlands outfit in 2011 and transformed the fortunes of the Foxes, guiding them to the play-offs in the 2012/13 campaign, where they were beaten over two legs by Watford.
But last season Leicester left their promotion rivals trailing, breaking the 100-points mark while securing top spot and earning Pearson the Championship manager of the year award.
The board have secured his services ahead of the new season and assistants Craig Shakespeare and Steve Walsh have also agreed new deals to June 2017.
Pearson told the club’s official website: "I have always seen my long-term future, and that of my staff, at Leicester City.
"On the back of the success we have worked so hard to achieve, I have always been confident that my future would remain here.
"I feel very proud to be the manager of a club with genuine ambition, a clear direction in which it wants to go and loyal owners that are prepared to support its development."
Leicester City vice chairman Aiyawatt Srivaddhanaprabha said: "From the first day I met Nigel, I knew he was the man to take us into the Premier League and I am delighted that he has been able to help us deliver that for our fans.
"He is a man of fine principles, a great leader and he believes in our long-term vision for Leicester City, while his qualities in coaching, motivation and player development have been evident in our success on the pitch.
"Nigel is the perfect fit for our football club and his ambitions, both short and long-term, match ours."