Parry will be North End's first signing of the summer, ending weeks of speculation as boss Alan Irvine looks to strengthen his squad after last season's sixth-placed finish.
The former Wales international, who controversially retired from international football 18 months ago, completed a medical at Deepdale on Monday morning before agreeing terms and inking a deal which will keep him at North End until the summer of 2012.
He told Preston's official website: "I'm delighted to sign for Preston North End. It's been going on for about a week now and it was a tough decision for certain reasons but I am very glad to be here and I'm ready for this new challenge.
"I like having the ball at my feet, running at defenders, taking people on and crossing the ball - that's my game. Hopefully I will be able to fit in with the rest of the Preston squad for what should be an exciting challenge."