After having a trial with the Blues near the start of the season, the 26-year-old had been offered a six-month deal but has failed to make the first team.
And on Tuesday he was allowed to play for Leicester reserves in a 2-0 defeat against Tottenham.
Haapala, who was down as a trialist for Leicester, is unlikely to travel with the City squad to Chelsea on Saturday despite us having 10 players unavailable.