The 24-year-old, who had fallen out of favour under Leicester coach Brendan Rodgers, is to boost Leverkusen's attacking power, with the Bundesliga club struggling recently.
Leverkusen, who only a few weeks ago led the Bundesliga standings, have won just one of their last seven league matches. They lost 1-0 to RB Leipzig on Saturday to drop to fourth place, 13 points off leaders Bayern Munich.
They have already brought in defenders Timothy Fosu-Mensah from Manchester United and Jeremie Frimpong from Celtic in this transfer window.
Football
Sometimes, Pep, it’s better to say nothing at all - The Warm-Up
17/09/2021 AT 07:43
"I have seen how Leverkusen like to attack, to play aggressive and how they dominate the game through possession. I fit well in this," Gray said.
There were no financial details available on the transfer, with the player's contract with Leicester running out in the summer.
"Thanks to his experiences from the Premier League, Demarai is a player who can instantly help us," said Leverkusen sports director Simon Rolfes.
Additional reporting from Reuters

Are Liverpool the new favourites to sign Mbappe? - Euro Papers

Premier League
Bailey, Onyeka, Daka - Seven under-the-radar signings to light up Premier League
11/08/2021 AT 09:51
Euro 2020
From pariah to hero, Sterling a Ballon d’Or contender and national treasure
10/07/2021 AT 07:52