The 43-year old replaces Graham Westley at Deepdale after his tenure there was ended last week and Grayson arrives after a stint at Huddersfield Town which finished last month when he was sacked.
"I got sacked by Huddersfield a few weeks ago, I've had a break and had a bit of a holiday but in that period of time I've been looking to get back," said Grayson.
"I love football, I'm a football man and I got itchy feet.
"I had one or two other opportunities to go to other clubs and had enquiries about going to other clubs, but once I spoke to the owners here I found a club that could match my ambitions as well as me matching theirs.
"I'm delighted to be here, I know that the club's got a fantastic tradition and history and hopefully we can get back to those winning ways and take the club back to where it belongs in the Championship, and hopefully beyond someday."