Relegated from the top flight last season, the sanction drops the Foxes from 17th to 20th in the Championship, leaving them above the drop zone only on goal difference.
An independent commission found that Leicester had breached the threshold under profit and sustainability rules for the three-year period up to the 2023/24 season, when they won promotion from the Championship, by nearly £21 million ($29 million).
In the three seasons from 2021/22 to 2023/24, the club posted losses of over £200 million.
In a statement, Leicester described the punishment as "disproportionate" and did not take enough account of "mitigating factors presented."
They added: "We remain committed to engaging constructively and ensuring that any action is fair, proportionate and determined through the appropriate processes."
Leicester are winless in their last four Championship fixtures and are without a permanent manager after the dismissal of Marti Cifuentes last month.
In the 2015/16 season they won the Premier League despite starting the campaign as 5,000-1 outsiders. They also won the FA Cup for the first time in 2021, but were relegated in 2023.
They bounced straight back to the top flight under Enzo Maresca, but were relegated again last season with just six wins in 38 games.
