Hobbs has signed a four-year contract with Leicester.
The 20-year-old joined The Foxes on loan last summer.
“I have thoroughly enjoyed my season with the club and I am absolutely delighted to make the move permanent,” Hobbs told Leicester’s official website.
“This is a massive club and I believe we can go all the way to The Premier League. That’s one of the reasons why I have committed to signing a four-year deal.
“I couldn’t be happier here. Leicester have shown great faith in me and instilled me with great confidence. I really am over the moon.”
