Ferguson, 37, left fellow Championship (second division) side Peterborough United in November having taken the club to successive promotions.
The Scot succeeds Alan Irvine, who was sacked last week despite taking Preston to the playoffs last season. Preston are currently 16th in the standings.
Ferguson has signed a 3-1/2 year contract and takes over with the club on a high after last weekend's 7-0 thrashing of Colchester United in the FA Cup third round.
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