Sources said the deal is for five years.
Preller had been serving as assistant general manager for the Texas Rangers. He has extensive international scouting experience, particularly in Latin America.
Preller will replace Josh Byrnes, who was fired in June after two-plus seasons as GM.
Under Byrnes, the Padres' payroll increased nearly $40 million to $89,881,696 on Opening Day this season -- 23rd overall -- but the team made little progress.
After finishing with 76-86 records in his first two seasons, the Padres were 32-43 and 12½ games back in the NL West at the time of his dismissal. They entered Wednesday 51-61 and 12 games back in the division.
Billy Eppler, assistant general manager of the New York Yankees and a former scout for the Padres, was also a front-runner for the job. Also in the mix was assistant GM Mike Hazen of the Boston Red Sox, and Kim Ng, senior vice president for baseball operations for Major League Baseball.
Ng also interviewed for the Padres' GM job in 2009 after Kevin Towers was fired. The job eventually went to Hoyer.The Padres are looking for stability. They're on their third ownership group since 2009 and Preller is their fourth general manager since then.
San Diego has had only two seasons above .500 since winning consecutive NL West titles in 2005-06.
Information from The Associated Press was used in this report.