Oakley is available for Saturday's Championship clash against local rivals Coventry City at the Walkers Stadium, subject to Football League approval.
The 30-year-old playmaker has signed a three-and-a-half year contract with the Foxes, keeping him at the club until the end of the 2011 campaign.
Oakley has made 61 starts for the Rams since making the move to Pride Park in August 2006 - scoring nine goals.
The Foxes beat off five other Championship clubs to Oakley's signature.
City boss Holloway said: "This is a fantastic signing for this football club. Matt is a player with tremendous ability and I am chuffed to bits that we have been able to bring him here."