City have spent £25m on the 20-year-old Nigerian, who could make his Premier League debut against the Gunners on Friday.
Iheanacho has the best goals to games ratio of any striker in the Premier League, although he found his opportunities limited at Manchester City.
But Henry has seen enough to think that Iheanacho could be an important player for City.
“It’s an amazing opportunity for him,” he told Sky Sports.
“I think back to Manuel Pellegrini’s time last season at Manchester City. He wasn’t the only one but he was the spark in the team, fighting everywhere, scoring goals, trying his hardest.
“So I think it’s a good buy for Leicester.
“It will be interesting to see how he interacts with Jamie Vardy. Is he going to do the job of Shinji Okazaki? Is Okazaki going to keep his place? Are they going to be more adventurous?
“I don’t know whether Craig Shakespeare will play a 4-4-1-1 or a proper 4-4-2, but it’s a good signing.
“Whenever he had to do something at Manchester City, even when things were not great for the team, he delivered.
“People might say he had better players around him but let’s not forget that Leicester won the league two years ago. They have some good players too.”