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The 20-year-old forward has made only three appearances for Nigel Pearson's side since making a season-long switch to the King Power Stadium.
And United have opted to take Powell back to Old Trafford following a disappointing spell with bottom-of-the-table Leicester.
Leicester stated on the club's official website said: "Leicester City would like to thank Nick for his contribution during the last four months and wish him well in the future."
