The 19-year-old striker is highly-rated by the Gunners and has represented England at Under-17, 18 and 19 level.
He had a two-month spell on loan at Charlton Athletic last season but a hamstring injury forced his early return to the Emirates Stadium.
Prior to going to Charlton in January, Derby-born Mavididi was top scorer in Arsenal's reserve side.
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He is the sixth summer arrival at Deepdale, joining Josh Harrop, Sean Maguire, Kevin O'Connor, Darnell Fisher and Declan Rudd - the keeper was a team-mate of Mavididi when both were on loan with Charlton.
Mavididi said: "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."
"I just want to put on that shirt, run out and do well.
"I'm buzzing, I can't wait to get started now."
Mavididi is not eligible for North End's Championship opener against Sheffield Wednesday as all signings - including loans - now have to be done by noon the day before the game.
He will be in the squad for Tuesday night's visit to Accrington Stanley in the Carabao Cup.