Campbell started 20 times for Birmingham last season
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Leicester have seen off competition from Championship rivals Watford to sign Birmingham striker DJ Campbell for a fee which could rise to £2.1m.
The 25-year-old has signed a four-year contract to become manager Martin Allen's 12th summer capture.
Foxes chairman Milan Mandaric said: "We have been chasing DJ for some time and after exhausting negotiations we are delighted to have completed the deal.
"I believe he will be a great acquisition for Leicester."
Leicester have not paid as much for a player since signing keeper Ian Walker from Spurs for £2.5m in 2001.
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Campbell becomes the Foxes' third signing from Birmingham this summer, joining Stephen Clemence and Bruno N'Gotty.
The striker first came to prominence at Yeading as the non-league club made it to the third round of the FA Cup in 2005.
His eye-catching displays earned him a move to Brentford - then managed by Allen.
He was there for just six months before another FA Cup showing - scoring twice to dump Sunderland out - persuaded Bimringham boss Steve Bruce to pay £500,000 for the pacy striker.
He failed to score that season as the Blues were relegated from the Premier League.
He managed just 20 starts last season, although he scored 12 goals as Birmingham bounced back into the top flight.
Brentford receive some of the fee because of the sell-on clause they negotiated when Campbell moved to St Andrews.