The 20-year-old came through the youth ranks at City, but failed to make a first-team appearance for the club and had loan spells at Port Vale, Blackpool and most recently Aberdeen, for whom he played 13 times in the second half of the 2009/10 season.
Hutchings told the club's official website: "We're really pleased to have Paul on board. He's a player who has been on our radar for quite some time and we're delighted that he's agreed to come to us."
Marshall, an England Under-20 international, added: "I'm delighted to come here and have the opportunity to play at a good level.
"I've already played at a good standard in the Scottish Premier League and the Championship, plus I've been to the World Cup with England Under-20s, so I'm looking forward to the challenge."