Arsenal sources said that the club were prepared to wait until after the Euros for Vardy to decide, but it was becoming increasingly clear that he had elected to stay with the Premier League champions, who have increased his pay to around £100,000 a week.
Having been given time off by Hodgson ahead of the Euros for his wedding, missing England's friendly against Australia, Vardy's club situation had become another sideshow and although it is now resolved, there is irritation around the camp that Leicester did not wait until after the finals before releasing the news.
"Leicester City have today agreed with the representatives of Jamie Vardy to extend the England international's contract with the Premier League champions for a further four years," the club said in a statement.
"Both parties hope that this announcement will end recent speculation regarding Jamie's future and confirm his long-term commitment to Leicester City Football Club.
"Jamie will continue to focus all of his efforts on trying to achieve success with the England team at the European Championships in France. There will be no further comment from either the club or the player on this matter until the conclusion of the tournament."
The wording of the statement would suggest that Leicester felt they were doing England a favour by settling the contract now, but the issue had, in fact, been shelved and Vardy was not being asked questions as to whether he would be leaving.
Instead, the announcement confirms that he was continuing to discuss and decide his future while on international duty - contrary to what he said - even if the offer was made before he flew out to France.
The news is, undoubtedly, a huge boost for Leicester, who have had bids for Watford captain Troy Deeney and Burnley centre-half Michael Keane rejected in the last few days. It will also bolster their hopes of retaining midfielders N'Golo Kanté - starring at these finals with France - and Riyad Mahrez, who are also expected to be subject to bids this summer.
Leicester manager Claudio Ranieri telephoned Vardy to ask him to stay and also texted to congratulate him on his goal against Wales, while captain Wes Morgan, Robert Huth and Kasper Schmeichel had all asked the club's star striker to snub Arsenal.
Vardy's decision also reflects the shifting financial state of football, with Leicester able to see off interest from a club of Arsenal's stature partly because of the vast new television revenues. Not so long ago that would have been highly unlikely, even though Leicester won the league.
It is also a significant and embarrassing blow for Arsenal and their manager Arsène Wenger, who is at Euro 2016 as a media pundit and has also attended all three of England's matches so far, even if he recently indicated his hopes of signing Vardy were reducing. He will now have to assess other strikers.
Arsenal have looked at a move for Alvaro Morata, but Chelsea are now in pole position to land the £40million-rated Spain striker after opening talks. Chelsea owner Roman Abramovich also attended Spain's last group game against Croatia in Bordeaux to look at the 23-year-old.