Souttar had been enjoying his season away from the club at Sheffield United.
However, their manager Chris Wilder confirmed that Souttar had a serious Achilles injury.
Speaking to BBC Radio Sheffield, he said: "Harry Souttar goes back to Leicester now, he's snapped his Achilles and is out for the season so that's a big blow for us.
"He's been amazing, his partnership with Anel (Ahmedhodzic) and with Jack (Robinson) as well. He's been outstanding and is a great personality to work with, a great character.
"I'm devastated for him. He loved it here and he's absolutely gutted. I spoke to him the day after Boxing Day, but we have to get on with it and show what we're all about."
Speaking about January, he added: "We've had conversations about after the 27 of December and they are ongoing positive conversations with the owners to sensibly help the group, and the supporters, in terms of having a strong second half of the season. I like the chemistry of the group but players need resting."