The former Liverpool midfielder had been at Stadium:MK technically as a player manager although he has only made 13 appearances this season - the last of which came at the end of October.
Since then, Hamann has been more involved with the coaching side of things but following the departure of Leicester coach Chris Powell to Charlton, Erikkson has been looking for a successor.
Hamann has had a strong career having played for clubs such sa Liverpool, Manchester City, Newcastle and Bayern Munich in his native Germany. In total, he commanded transfer fees totalling over £13million.
A 2005 Uefa Champions League winner with Liverpool, Hamann joined MK Dons in May last year having been out fo the game for a year and MK Dons have wished him all the best at his new job at the Walkers Stadium.
Leicester are many people's tip for a late promotion push following some astute loan signings and Erikkson will hope Hamann can offer his experience as they look to return to the Premier League for the first time since 2004.