Benkovic only moved to the King Power Stadium in August, but the centre-back has been allowed to spend at least the first half of the season in Scotland with Celtic.
The Croatian has said that while he has "respect" for Leicester, both he and manager Claude Puel agreed that there were benefits in spending time gaining regular football at the Glasgow giants.
The 21-year-old told the Daily Record: "I was at Leicester for three weeks and it was great. The price tag was nothing to do with me, but I didn't want to spend all season on the bench so I spoke to the manager and told him how much I respect the club, but I want to improve and the only way to do that is to get games.
"I'm young, I need the minutes on the park and the manager agreed with me. I want to play as much as possible, so a season-long loan with Celtic was agreed and Leicester has the option of recalling me in the winter.
"I think this is the best option for me for preparing for football in England and their Premier League - that's why I am delighted to go to Celtic."
Benkovic played just 28 minutes in an EFL Cup tie against Fleetwood Town before signing for Celtic.