After his glittering career, which has seen him play over 500 Premier League games, keeping 150 clean sheets, and having been capped over 100 times by his country, Schwarzer said he is relishing this new challenge.
"Sometimes I have to pinch myself but there is also a lot of hard work," he said.
"I enjoy playing and if didn't like playing as much as I did and look after myself like I do then this wouldn't happen.
"I want to continue to play as long as I possibly can and as long as I am good enough to play. I believe I am.
"At the end of the day it is all about performances. I believe given the chance I can perform and help Leicester City."
Foxes boss Nigel Pearson said: "I'm absolutely delighted that we've been able to sign a player of Mark's vast experience.
"To have played the number of games he has played at the very top level is outstanding and highlights both his ability and his professionalism.
"I know Mark really well. He has a number of great attributes as a player and brings a huge amount of Premier League know-how to the squad.
"His qualities as a player and as a man will be very valuable for us during the second half of the season and beyond."