The 25-year-old has moved to the Reebok Stadium for an undisclosed fee after falling out of favour with the Foxes since the arrival of Nigel Pearson as manager last season
The centre-back joined the Foxes in a £5 million move from Reading last summer but fell out of favour at the club following the appointment of Nigel Pearson as manager in November 2011.
Trotters boss Owen Coyle believes the experience Mills, who joins for an undisclosed fee, has picked up from playing four consecutive years in the Championship will prove vital.
He told the club’s official website: "Matt is a player who has a high level of experience in the Championship. We are delighted to have made this acquisition as he adds strength and quality into the mix.
"He is 25 years old and has already captained teams at this level, so we know what he will bring to the squad, both on and off the pitch."
Mills becomes Bolton's second new signing of the summer following the capture of Republic of Ireland midfielder Keith Andrews, who signed a deal until 2015 as a free agent.