The 28-year-old centre-back has agreed a four-year deal and will be available for this Saturday’s Premier League opener at home to Sunderland.
A former France U21 international, the 6ft 2ins Benalouane began his career at St Etienne before moving to Italy in 2010, when he signed for newly promoted Cesena in Serie A.
He then moved on to Parma in 2012 before a January 2014 switch to Atalanta, who he helped to avoid relegation from Serie A.
Benalouane becomes Leicester manager Claudio Ranieri’s second signing of Monday, the Foxes having earlier announced that they had acquired N’Golo Kante from Caen.
And they have now made five signings this summer in total, Robert Huth, Christian Fuchs and Shinji Okazaki having already arrived.
Benalouane told the Leicester website: “My first impression is very good.
“In this city, and in England, the most important thing is football. I hope I can do my best in this team, because I’m very, very happy to be here.
“My favourite position is central defender and I like to play with the ball and control my defence. I’m a player with power and I have technical quality. I hope to use this at Leicester.
“I spoke with Claudio Ranieri and I’m very happy to work with him. For me and for everyone, he is a very big manager.
“He told me it’s different to Italy, because it’s very high-impact. Now I hope that I can have a great season.”