The 25-year-old has signed a four-year contract with The Foxes, with Jurgen Klopp's Reds happy to let the Welshman move on after signing Alisson Becker from Roma.
Klopp had originally been set to give Ward a chance at the number one spot heading into the new season, but breakthroughs in talks for Alisson saw plans change quickly at Anfield.
With the Brazilian now signed and ready to take over starting XI duties, Ward was allowed to leave, while the futures of error-prone keepers Loris Karius and Simon Mignolet remain up in the air.
Ward, meanwhile, becomes Leicester's fourth signing of the summer transfer window after the arrivals of Ricardo Pereira, Jonny Evans and James Maddison.
Speaking to LCFC TV, Ward said of his transfer: “I’m delighted to be here and I’m really looking forward to the future with this football club.
"I’ve come here to develop my all-round game and hopefully help deliver some more success. The club has had that in recent years and hopefully there’s more to come in the future."
Leicester boss Claude Puel also spoke, expressing his happiness in the competition Ward's signing will bring to the club.
“I’m very happy to welcome Danny to Leicester City Football Club," the manager said.
"Pre-season preparations have started well for us and with Danny joining the group, it will give us even more competition in the squad, which is crucial for us ahead of what will be another very competitive Premier League campaign.”
Leicester's pre-season matches begin on July 21 with a match against Notts County, with an additional four to follow before the 2015-16 champions return to Premier League action against Manchester United on August 10.