The new deal will keep Oakley at the Walkers Stadium until the summer of 2012.
Oakley told the club website: “I’ve had three fantastic years with Leicester, during which the club has made huge progress on the road back to the top flight – the level our supporters deserve to see City playing at.
“With the ambition of the owners, the vision of the manager and the talent in our squad, it seems only a matter of time before we achieve our ambition of Premier League football and I’m delighted I’ll have the opportunity to continue to be part of the journey.”
