Andy King's eighth goal this term gave Leicester victory in the East Midlands derby at a wintry Walkers Stadium.
Leicester had the clearer chances of an even first half with Forest's Luke Chambers clearing off the line from Roman Bednar and later Darius Vassell.
But after the break Vassell burst his way through a sea of defenders and King tapped the ball in from six yards.
Forest had a penalty claim rejected when Rob Earnshaw fell in the area but they created little in the second half.
In freezing conditions, Leicester's victory was the perfect way for departing chairman Milan Mandaric to bid farewell as he finalises his move to take charge at Sheffield Wednesday, and he thanked the home fans for their support before the match.
After a cautious start it was Forest who had the first openings, Wes Morgan unable to control his header when well placed inside the area and Dele Adebola firing over at full stretch left-footed at the far post.
But Leicester looked set to take the lead when on-loan West Brom striker Bednar drove a low shot from 12 yards, only for Chambers to block on the line, before goalkeeper Lee Camp bravely smothered a volleyed rebound effort from Curtis Davies.
Neither side were able to retain possession for any sustained periods, but the errors contributed to some exciting end-to-end action.
Kyle Naughton's mis-directed headed back pass was intercepted by Earnshaw but Leicester goalkeeper Chris Weale raced off his line to block the Forest striker.
Chambers then somehow slid in to hook off the line after an outstretched Vassell touched the ball past Camp, and as the Foxes finished the half strongly Gallagher curled fractionally wide.
It was the home side who maintained the momentum and made the brighter start to the second half, as Ritchie Wellens saw a shot parried by Camp.
With the ball not properly cleared, Leicester were convinced they should have had a penalty when Vassell appeared to be held by Chris Gunter, but a perfectly placed referee Michael Oliver rejected the claims.
There had not been a goalless encounter between the teams in the league since October 1956 and just short of the hour mark Vassell's persistence ensured that would remain the case, his cross shot brushing Camp's fingertips before falling invitingly for King.
Forest swiftly introduced their on-loan Arsenal teenager Aaron Ramsey for his first taste of competitive football since suffering a broken leg at Stoke in February, but another burst from Vassell almost created a second for Leicester, Gallagher steering wide when through inside the area.
The visitors had penalty claims of their own when Earnshaw tumbled after seemingly being clipped by Greg Cunningham, but again referee Oliver was not in agreement.
As the snow flurries intensified Leicester were denied a second in the closing stages as Camp made a fine save from close range to tip Steven Howard's shot over the bar, but the victory lifts them to 14th place, only two points behind Forest.
90:00+3:33 The final whistle goes and the game is over.
90:00+1:20 Garath McCleary challenges Richie Wellens unfairly and gives away a free kick. Richie Wellens takes the free kick.
90:00+0:20 Andy King fouled by Guy Moussi, the ref awards a free kick. Kyle Naughton restarts play with the free kick.
88:34 Substitution (Leicester) makes a substitution, with Martyn Waghorn coming on for Paul Gallagher.
87:10 Inswinging corner taken from the left by-line by Greg Cunningham, save by Lee Camp.
86:43 Corner taken left-footed by Greg Cunningham to the near post, Nathan Tyson makes a clearance.
86:19 Steve Howard takes a shot. Save made by Lee Camp.
85:03 Nathan Tyson produces a cross, clearance made by Greg Cunningham.
82:36 Curtis Davies gives away a free kick for an unfair challenge on Robert Earnshaw. Ryan Bertrand takes the direct free kick.
79:43 Substitution Roman Bednar leaves the field to be replaced by Steve Howard.
79:27 Effort on goal by Curtis Davies from 35 yards went harmlessly over the goal.
79:04 Paul Anderson challenges Greg Cunningham unfairly and gives away a free kick. Richie Wellens restarts play with the free kick.
74:56 Aaron Ramsey takes a inswinging corner.
74:38 Nathan Tyson takes a shot. Save made by Chris Weale.
73:48 Outswinging corner taken from the left by-line by Aaron Ramsey, Lloyd Dyer makes a clearance.
72:31 Free kick awarded for a foul by Paul Anderson on Kyle Naughton. Chris Weale takes the indirect free kick.
71:24 Substitution Lloyd Dyer on for Darius Vassell.
71:06 Effort on goal by Andy King from inside the box misses to the right of the target.
70:03 Free kick awarded for an unfair challenge on Robert Earnshaw by Curtis Davies. Free kick taken by Aaron Ramsey.
67:54 Substitution Lewis McGugan leaves the field to be replaced by Nathan Tyson.
65:10 Paul Gallagher takes a inswinging corner from the left by-line to the near post, clearance made by Ryan Bertrand.
64:21 Wes Morgan challenges Roman Bednar unfairly and gives away a free kick. Paul Gallagher takes the direct free kick.
60:54 Paul Gallagher has an effort at goal from deep inside the area missing to the right of the goal.
60:34 Roman Bednar is caught offside. Free kick taken by Lee Camp.
60:10 Substitution Aaron Ramsey on for Chris Cohen.
58:33 Assist by Darius Vassell.
58:33 GOAL - Andy King:Leicester 1 - 0 Nott'm Forest Andy King finds the back of the net with a goal from inside the area to the bottom left corner of the goal. Leicester 1-0
57:57 The ball is crossed by Richie Wellens, save by Lee Camp.
54:28 Free kick awarded for a foul by Richie Wellens on Garath McCleary. Direct free kick taken by Wes Morgan.
52:26 Shot by Guy Moussi. Save made by Chris Weale.
51:05 The assistant referee signals for offside against Andy King. Luke Chambers takes the direct free kick.
49:29 Free kick awarded for an unfair challenge on Paul Anderson by Richie Wellens. Luke Chambers takes the direct free kick.
48:20 Richie Wellens is penalised for handball and concedes a free kick. Chris Cohen takes the direct free kick.
47:07 Richie Wellens gives away a free kick for an unfair challenge on Guy Moussi. Direct free kick taken by Guy Moussi.
46:25 Shot from just outside the box by Yuki Abe goes over the bar.
46:12 Darius Vassell fouled by Ryan Bertrand, the ref awards a free kick. Paul Gallagher takes the direct free kick.
45:01 The game restarts for the second half.
45:00+1:45 The ref blows to signal half-time.
45:00+0:47 Ryan Bertrand challenges Darius Vassell unfairly and gives away a free kick. Darius Vassell delivers the ball, Effort from
deep inside the area by Paul Gallagher misses to the right of the goal.
45:00+0:47 Booking Ryan Bertrand is cautioned by the ref for unsporting behaviour.
43:07 Corner taken right-footed by Paul Gallagher from the left by-line, Effort on goal by Paul Gallagher from deep inside the penalty
area misses to the right of the target.
40:14 The ball is swung over by Kyle Naughton, save made by Lee Camp.
39:44 The assistant referee signals for offside against Robert Earnshaw. Indirect free kick taken by Chris Weale.
38:48 Corner from right by-line taken by Chris Cohen.
38:29 Robert Earnshaw has a headed effort at goal from deep inside the area missing to the right of the goal.
37:59 Inswinging corner taken from the left by-line by Paul Gallagher, save by Lee Camp.
37:07 Ryan Bertrand handles the ball and concedes a free kick. Greg Cunningham shoots direct from the free kick.
35:53 Substitution Robert Earnshaw joins the action as a substitute, replacing Dele Adebola.
35:33 The ball is swung over by Lewis McGugan, clearance made by Curtis Davies.
32:41 Wes Morgan challenges Roman Bednar unfairly and gives away a free kick. Direct free kick taken by Paul Gallagher.
31:06 Foul by Roman Bednar on Luke Chambers, free kick awarded. Free kick taken by Luke Chambers.
30:21 Wes Morgan challenges Roman Bednar unfairly and gives away a free kick. The free kick is delivered right-footed by Richie
Wellens from own half, Ryan Bertrand manages to make a clearance.
26:30 Curtis Davies takes a shot. Save by Lee Camp.
25:14 Unfair challenge on Richie Wellens by Guy Moussi results in a free kick. Strike comes in from Greg Cunningham from the free
kick, save by Lee Camp.
23:16 Chris Cohen challenges Andy King unfairly and gives away a free kick. Paul Gallagher produces a strike on goal direct from
the free kick, Wes Morgan gets a block in.
23:16 Booking The referee shows Chris Cohen a yellow card.
20:18 Foul by Chris Cohen on Richie Wellens, free kick awarded. Richie Wellens takes the direct free kick.
19:35 Garath McCleary crosses the ball, Effort on goal by Dele Adebola from inside the area goes harmlessly over the bar.
18:04 Roman Bednar fouled by Wes Morgan, the ref awards a free kick. Direct free kick taken by Richie Wellens.
17:11 Roman Bednar is flagged offside by the assistant referee. Lee Camp takes the free kick.
16:00 Short corner worked by Chris Cohen, Paul Anderson sends in a cross, Curtis Davies manages to make a clearance.
15:38 Chris Cohen takes a shot. Blocked by Yuki Abe.
15:14 Garath McCleary crosses the ball, Curtis Davies manages to make a clearance.
13:52 Greg Cunningham fouled by Chris Gunter, the ref awards a free kick. Chris Weale takes the direct free kick.
13:28 Corner taken by Chris Cohen from the right by-line, save by Chris Weale.
12:18 Foul by Kyle Naughton on Paul Anderson, free kick awarded. Ryan Bertrand takes the free kick.
9:50 Free kick awarded for a foul by Roman Bednar on Wes Morgan. Lee Camp restarts play with the free kick.
7:15 Free kick awarded for a foul by Chris Cohen on Andy King. Yuki Abe restarts play with the free kick.
5:09 Free kick awarded for a foul by Dele Adebola on Jack Hobbs. Free kick taken by Jack Hobbs.
0:00 The ref blows the whistle to begin the match.
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