He replaces Nigel Pearson, who left the Foxes last week to take charge at Hull City.
"I am delighted to be here, it is a great club with great supporters and a rich history and I am very excited by the challenge," said Sousa.
"The club has a fantastic stadium with great facilities and I am very much looking forward to working with the players."
Cardiff City have loaned the midfielder Daniel Drinkwater, 20, from Manchester United
Middlesbrough have completed the signing of midfielder Nicky Bailey from Charlton Athletic.
Gary Ablett, the former Everton and Liverpool defender, is expected to join Ipswich Town's backroom staff.
The Tractor Boys have turned to the former Stockport County manager, as Ian McParland was unable to commit to a full-time role.
"We are hoping for Gary to come on board and we are trying to sort out a deal for him to come along and work alongside myself and Tony Loughlin with the first team," the Ipswich manager, Roy Keane, told Sky Sports.