The new development is likely to include a hotel and extra conference facilities, and could eventually be expanded to hold 40,000 fans.
The news came as league leaders Manchester United unveiled more details of their plans to expand their retailing operation into Asia.
Leicester has been playing to full gates of 21,500 all this season after its recent Cup and League success and it estimates it is turning away at least 4,000 fans and missing out on extra gate receipts of at least pounds 2m for every home game. Leicester originally hoped to extend Filbert Street but it ran into local planning problems as the redevelopment would have led to the demolition of local houses.
Leicester also announced yesterday it had signed a new pounds 1m, two-year deal, with Walkers Snacks to sponsor the team's shirts. It replaces the existing deal, which was worth just half that sum.
Leicester City announced profits of pounds 1.9m before transfer fees for the six months to January, thanks to a strong rise in television income and revenue from new conference facilities at the ground.
Players' wages have risen 10 per cent this year to pounds 6m, although the club points out that is only half the average for the Premier League. Unlike rivals such as Manchester United the club has also seen a rise in sales of replica shirts.
Undeterred by falling merchandise sales, Manchester United are planning to push ahead with expansion plans in the Far East. The group is hoping to open a chain of Red Cafes in Asia over the next few years having just opened its first site at Old Trafford next to a new museum complex.
The club is in talks with a Far Eastern retailer about establishing up to 100 "shops-within-shops" as well as 20 stand-alone stores. A deal could be tied up imminently.
Meanwhile Hay & Robertson, the rapidly expanding sportswear group is expected today to announce that is has won the contract to supply leisure clothing such as T-shirts and sweatshirts based on the England team strip.
The group plans to use the contract to promote its Admiral brand.