Ulloa becomes Leicester City's fifth summer signing following arrivals of Matthew Upson, Marc Albrighton, Jack Barmby and Ben Hamer.
The fee for the Argentine, who scored 16 goals for the Seagulls in all competitions last season, could reportedly reach £10 million based on apperances.
Leicester manager Nigel Pearson said: "He comes into quite a competitive squad. If it heightens the competitive spirit in the squad, then that's good.
"I think the players have a good collective spirit that has served us well so far, but we are going to have to replicate that this season, and also on the technical side of it make sure we continue to improve. I think we've got decent scope for that."
Brighton chairman Tony Bloom stated the Championship club accepted a record fee after the 27-year-old made it clear he wanted to play in the England's top division.
"Initially we did not want Leo to go, but once he made it clear to us he wanted to join Leicester and play in the Premier League, it was then a case of ensuring we received our valuation," Bloom said.
"Leo has been tremendous for us, he has given us some truly memorable moments in the last season and a half - with his header against Nottingham Forest the pick of the bunch.
"I would like to thank him for his efforts and wish him well in the Premier League."
The Foxes' previous record buy was Ade Akinbiyi, whom they bought for £5.5m from Wolves in July 2000.
The new signing is scheduled to fly out to Thailand with his new team-mates on Wednesday ahead of a friendly with Everton on Sunday in Bangkok.
