Under-pressure Chelsea boss Frank Lampard's hopes of building on a 1-0 win at Fulham last time out were dealt a blow inside six minutes when Wilfred Ndidi's strike from the edge of the area put Leicester in front.
After Chelsea was denied a penalty by VAR, James Maddison continued his rich vein of form to double Leicester's lead four minutes before half-time.
A lacklustre Chelsea side rarely looked like producing a comeback, meaning Leicester leapfrog both Manchester clubs to go top after 19 games or more for the first time since their title-winning 2015-16 campaign.
Lampard's side, meanwhile, finds itself nine points behind Leicester and five adrift of the top four.
Chelsea's failure to deal with a set-piece saw Leicester take the lead in stunning fashion, Ndidi's effort with the outside of his boot cannoning off the post and beyond Edouard Mendy after Harvey Barnes had scuffed Marc Albrighton's pull-back into his path.
Another long-range strike almost made it 2-0 as Maddison crashed a shot off the crossbar and, after Reece James and Thiago Silva tested Kasper Schmeichel, Mendy was forced to turn an ambitious attempt from Albrighton over the bar.
Callum Hudson-Odoi fired into the side-netting after good work from Christian Pulisic, with Jamie Vardy then failing to chip Mendy when through on goal, though replays showed he had strayed offside.
Leicester looked set to be punished for failing to build on their advantage when Jonny Evans tripped Pulisic and Craig Pawson pointed to the penalty spot, only for the VAR, Andre Marriner, to rule the contact had taken place outside the box.
The host instantly took advantage of its reprieve as Maddison coolly stroked home as Albrighton's delicate long ball found Chelsea's defence wanting.
Brendan Rodgers' men remained in the ascendancy after the break, James Justin off target with a free header and Youri Tielemans denied by Mendy.
Those missed chances proved immaterial, Timo Werner finding the net for Chelsea only to see the offside flag raised, with the club that shocked the Premier League in 2016 sending a fresh indication they could repeat the feat.