The 22-year-old is contracted to Shakhtar Donetsk, but has been at Lyon since March 2022 under the FIFA ruling which allowed all foreign players to suspend their contracts in Ukraine following Russia's invasion.
As it stands, he is due to return to Shakhtar on July 1.
The winger scored six goals in 17 appearances for Lyon in Ligue 1 this season.
"I’m really happy to be here. I’ve had a look at the pitch and the stadium, it’s beautiful and I can already imagine what it’ll be like with a lot of fans," Tete told the Leicester website.
"I hope to score a lot of goals and assists."
Leicester sit just one point above the Premier League relegation zone in 14th.
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