Peltier, a former Liverpool trainee, has signed a three-year contract and arrives at Elland Road after one season with the Foxes.
The 25-year-old has made over 200 career appearances having also played for Hull, Yeovil and Huddersfield.
Leeds manager Neil Warnock has been on the look out for a full-back since missing out on Joel Ward, who completed his switch from Portsmouth to Crystal Palace earlier this summer.
Peltier, for whom Leicester paid £750,000 to Huddersfield last summer, made 47 appearances for the Foxes last season, but was not a favourite of current boss Nigel Pearson.
The full-back had been linked with a return to Huddersfield this month, but the Terriers are understood to have baulked at Leicester's valuation of the player, who becomes Warnock's ninth summer signing following the arrival of Jason Pearce, Adam Drury, Paul Green, Paddy Kenny, Andy Gray, Jamie Ashdown, Luke Varney and David Norris to Elland Road.