The Foxes announced the move Monday, adding that the 22-year-old joins from Monaco on a four-year deal. Tielemans spent the second half of last season at the King Power Stadium on loan from the Ligue 1 side.
"It is such a great feeling to sign for this football club. Ever since I arrived on loan last season, all the players, the staff, and the fans have been fantastic with me, so I’m thrilled to be able to become a Leicester City player," Tielemans said.
He scored three goals in 13 appearances for the Foxes last season, and was the youngest Belgium player to feature in the Champions League when he made his tournament debut for Anderlecht in 2013 at 16 years old.
It was initially expected that Portuguese midfielder Adrien Silva, who swapped places with Tielemans during the January window, would be part of the deal. Any deal for Silva's return to the principality would now require a separate transaction.
The reported £40-million fee eclipses the £30 million paid to Newcastle for Ayoze Perez last week. Islam Slimani's move to Leicester cost the club £28 million plus add-ons in 2016, though it's unlikely the Algerian met the criteria for the additional payments with just eight goals in 35 league appearances over two seasons.