The npower Championship club have confirmed they had reached an agreement with the Toffees which could lead to a permanent deal in the summer.
The 28-year-old Nigeria international has passed a medical and will be eligible to play for the Foxes as soon as he receives Football League clearance.
Yakubu, who will hope to play at Preston this weekend, is Leicester's third signing of the January transfer window after Ben Mee and Sol Bamba.
The former Portsmouth and Middlesbrough forward will hope the move can rejuvenate a career which has stagnated since he suffered a serious Achilles tendon injury in November 2008.
Yakubu scored 21 goals in his first season at Goodison Park after an £11.25million move from Boro four years ago but has found the net just once this term.
Everton manager David Moyes left him out at the start of the season as he felt he lacked match fitness after a late return from the World Cup and the distraction of an approach from West Ham.
Yakubu's departure could provide Everton with the flexibility to bring in a replacement on loan.
Manager David Moyes has bemoaned his side's lack of goals from strikers all season but has no funds available to buy this month.
The Toffees have been linked with a loan move for Monaco's Dieumerci Mbokani, who has reportedly also attracted interest from Aston Villa and West Brom.
Yakubu's career:
1998 - Gil Vicente - 0 apps
1999-2003 - Maccabi Haifa - 50 apps (24 goals)
1999-2000 - Hapoel Kfar Saba (loan) - 23 apps (6 goals)
2003 - Portsmouth (loan) - 14 apps (7 goals)
2003-2005 - Portsmouth - 66 apps (29 goals)
2005-2007 - Middlesbrough - 73 apps (25 goals)
2007 - Everton - 80 apps (25 goals)
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