Leicester parted ways with their previous manager Ruud van Nistelrooy last month after the club was relegated to the English second division, finishing 18th in the Premier League.
"This is an amazing club with a rich history, and I am honored to be invited to help craft the next chapter," Cifuentes stated in a release from Leicester.
The 43-year-old Spaniard previously managed Hammarby, guiding them to a Swedish Cup final and UEFA Conference League qualification. He took charge at QPR in October 2023.
QPR placed Cifuentes on gardening leave in April, prior to their last match of the Championship season, as they finished 15th, seven points above the relegation zone.
Leicester will kick off their 2025/26 Championship season at home against Sheffield Wednesday on August 10.