Shinji Okazaki put the Foxes on course for progression inside just five minutes at the King Power Stadium, converting from Christian Fuchs' cross.
Riyad Mahrez then doubled the hosts' lead from the penalty spot after half-an-hour, sending the goalkeeper the wrong way for his fourth goal in five games in this competition.
Leicester's lead was halved just seven minutes into the second-half. Jose Izquierdo ran 40 yards and hammered an effort past Ron-Robert Zieler for the first goal that Leicester had conceded in Europe after 410 minutes and 54 shots.
Yet the home side held strong to maintain their unbeaten record and book their place in the first knockout round as Group G winners due to Porto's goalless draw in Copenhagen.
Just one change for the hosts
Claudio Ranieri made just the one change from Saturday's defeat to Watford, with Andy King replacing Daniel Amartey in central midfield.
With striker Islam Slimani ruled out with a groin injury, Shinji Okazaki joined Jamie Vardy in a familiar front two - while Ron-Robert Zieler again started in goal with first-choice 'keeper Kasper Schmeichel still sidelined with a fractured hand.
The visitors meanwhile made four changes from their last-gasp 1-0 win over Sint-Truiden on Friday, with Ruud Vormer, Stefano Denswil, Wesley and Ricardo van Rhijn all making way for Laurens De Bock, Tomas Pina, Hans Vanaken and Brandon Mechele.
Leicester start strongly
Amidst various permutations, Leicester came into the game knowing that just a point would secure their progress to the next round.
Even better, Ranieri's charges knew that they could even secure first-place in the group provided that they bettered the result of second-placed Porto, who were away at Kobenhavn.
And they didn't leave it long to put the pressure on to the Portuguese giants, going 1-0 up inside just five minutes.
Fuchs drove down the left-hand side after good footwork from Jamie Vardy to retain possession, before curling an inch-perfect cross for in towards Okazaki.
Unmarked, the Japanese striker's swing of the left boot allowed him to fire high past Ludovic Butelle for his fourth goal of the season in all competitions and his first in Europe.
That, just as Marc Albrighton's fifth-minute goal in the reverse tie in Bruges back in September, set the tone as Leicester played with the kind of confidence, flair and energy that typified their remarkable title-winning campaign last term.
Winger Mahrez, having scored three goals in four appearances in Europe so far this term, went close to doubling the Foxes' advantage after just eight minutes.
The mercurial Algerian twisted and turned inside the box before driving a powerful low effort towards the near post, only to be denied by the strong right leg of Butelle.
In his programme notes, Leicester boss Ranieri pleaded with his team to maintain their attitude and work ethic. He insisted that "the only medicine to improve is to work hard together" and his players received evidently that message loud and clear.
They swarmed all over their Belgian opposition, rarely giving them a second on the ball, with goalscorer Okazaki unlucky not to make more of a close-range effort after Vardy had won possession in the box and found Fuchs to cross.
Despite Michel Preud'homme's Brugge packing numbers behind the ball, Leicester regularly threatened openings by going out wide - with full-backs Fuchs and Danny Simpson consistently overlapping high up the pitch.
Brugge only showed brief glimpses of threat up the other end, Zieler denying Vanaken's header after Benoit Poulain's flick-on from a long throw-in before Vossen flicked the ball over his head on the turn but lost his footing in attempting a volley.
Mahrez doubles Foxes' lead from the spot
Leicester carried the greater convinction going forward and looked capable of adding to their advantage with every attack. That they did after 28 minutes, when Albrighton's neat footwork tricked Dion Cools into tripping him inside the box for a penalty.
Mahrez, having despatched a spot-kick in the previous meeting of these two teams, stepped up to send Butelle the wrong way a second time as Leicester took full control of the tie.
The Foxes' seven previous Premier League games prior to the visit of Brugge had seen Mahrez play just one successful pass to Vardy - but their connection in the Champions League has been more typical of the link-up they showed last season.
Their quality here, both on and off the ball, typified Leicester's performance, with the home side simply much better in all departments.
And while Brugge threatened again towards the end of the first period, Zieler being forced to punch clear Izquierdo's effort from the edge of the area - Leicester never looked troubled.
Brugge pull one back to up the ante
But within seven minutes of the restart, their comfort was shaken after a sublime individual goal from Izquierdo. The striker broke free down the right, using his pace to stay ahead of Fuchs before powering a blistering right-footed effort into the top corner at Zieler's near post once into the box.
That was the first goal in five games in the Champions League that Leicester had conceded. But the home side far from panicked, staying true to their 'Forever Fearless' mantra and instead looking to get straight up the other end and restore their two-goal advantage.
It seemed as though they had done just that on 59 minutes, but after Vardy flicked in from Fuchs' curling cross with outside of his right foot, he was rightly flagged offside to rule the goal out.
Immediately up the other end, Brugge had the ball in the back of the net themselves as Claudemir guided a finish past Zieler - but his too was rightly ruled out, again for offside.
Preud'homme opted to make a change on the hour mark, Anthony Limbombe replacing Pina and he could have made the ideal contribution off the bench on the counter-attack, only to fire high and wide from 10 yards.
Ranieri too soon decided to switch things up after 67 minutes, Jeff Schlupp and Demarai Gray replacing goalscorers Mahrez and Okazaki.
Both sides waste chances as Leicester hold on
And Schlupp too could have had a major impact within his first few touches. He stole in to intercept the ball around 40 yards from goal and drove into space before opting for a low drive which was central enough for Butelle to save easily.
Leicester's failure to extend their lead ensured a tense final 15 minutes, Brugge enjoying more of the possession as they probed for an equaliser.
They were forced to survive a few scares, Vossen just inches from surely scoring, needing only to meet Vanaken's flicked header but arriving a second too late.
Just minutes later, another corner caused panic as centre-back Robert Huth turned just behind his own post as they gave themselves harder work than necessary.
Gray could and should have wrapped up proceedings on 89 minutes, only to fire straight at Butelle after Vardy had headed into his path, while Wesley wasted a chance to make it 2-2 on the counter at the other end.
Leicester had yet more opportunities late on but Gray again couldn't take advantage. Regardless, they retained their lead to make yet more history in progressing to the last 16 in their debut Champions League campaign.
Not only that, Porto's failure to score in Denmark meant that Leicester finished as Group G winners before the two teams meet in Lisbon for the final round of group stage matches next month.