The 19-year-old has yet to make his Gunners debut, but made five appearances on loan at League One club Charlton Athletic last season.
"I'm delighted to get it over the line, I'm happy to sign and now I'm ready to kick on for the new season," Mavididi told Preston's official website.
"I just want to put on that shirt and run out and do well. I'm buzzing, I can't wait to get started now."
Preston manager Alex Neil added: "I think he'll bring pace and a directness from either a wider area or a central nine.
"I think he's a perfect fit for us certainly in terms of attributes that we like to have in the team and he'll give us that."
Mavididi could make his Preston debut when they play Accrington Stanley in the EFL Cup on August 8.