The move sees the 28-year-old reunited with manager Tony Mowbray, with whom he previously worked during their time together at Middlesbrough.
Leutwiler, who is a Canada international, has signed a two-year deal at Ewood Park which will keep him at the club until 2019.
"I'm obviously very happy and delighted to sign and be part of this club. It's a huge club, with a lot of targets in front of us - promotion definitely - and that's the main attraction," he told the club's official website.
"The infrastructure and everything here is great, and it's the right step for me at this moment of my career. I'm very proud to be here now and I'm just looking forward to it. [Mowbray is] a great manager. I worked with him for almost two years at Middlesbrough and it was a great experience there.
"I was a bit younger at the time, but I learned a lot about English football, it was the perfect club to come to and I had a great time. He brought me over from Switzerland to England and it's another occasion now to be with him here for a couple of years and I'm really happy."
Leutwiler becomes Blackburn's seventh signing of the summer following their relegation from the Championship last season.