53 year old Craig, 53 has signed a three-year contract to remain in charge of First Team matters, having successfully assumed the responsibilities in February following the departure of Claudio Ranieri.
Leicester City Vice Chairman said Craig has shown all the qualities in leadership, motivation and talent management that are required to be successful in the role.
Nigeria stars Ahmed Musa and Wilfred Ndidi have both worked under Shakespeare since February when he took over from the sacked Claudio Ranieri.
Reacting on his appointment, Shakespeare, who was assistant manager for five years, said it is an exciting opportunity to continue in his career and to continue to work with a club and a group of staff he has grown fond of.
He also expressed gratitude to the owners and the Board of Directors for their continued faith and support.
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