The 29-year-old has signed a four-year deal at the King Power Stadium after he impressed Foxes manager Craig Shakespeare when the sides met in the Champions League last season.
Iborra captained Sevilla to a fourth-placed finish in La Liga last season, scoring seven goals in 31 league appearances under Jorge Sampaoli.
He becomes Leicester's second signing of the summer following the arrival of Harry Maguire from Hull City as the former champions look to improve on a 12th-placed finish in 2016-17.
“I’m very happy to be here with Leicester City and I’m looking forward to experiencing the Premier League with my new team-mates next season," he told the club's official website.
"Everything about this club seems good and it’s been great to meet my new team-mates. I’ve already spoken with them about the city and the club so I can’t wait to get started."
Shakespeare added: "I'm absolutely delighted that Vicente has joined us. He’s player with such a good pedigree from his time in Spain with Sevilla and he adds some really strong competition to our squad."
Iborra will likely battle with Danny Drinkwater and Wilfred Ndidi for a place in the starting XI, while Andy King and Daniel Amartey are also available as midfield options.