The midfielder has signed a three-and-a-half year deal at Deepdale.
Preston have paid an initial fee of £300,000 with a further £300,000 payment depending on appearances.
The move ends a saga over the future of the 19-year-old, who was highly rated at Maine Road having come through the academy ranks.
But he fell out of favour over a contract wrangle after playing 11 games for City this season.
Etuhu tried to walk out on his one-year deal at the turn of the year, claiming he was a free agent due to a 'get-out' clause in his contract.
But City's lawyers insisted Etuhu was still their player and therefore would command a transfer fee.
Preston boss David Moyes was delighted to beat off the attentions of several Premiership clubs in acquiring the youngster's signature.
"We are delighted to add Dickson to our squad of already young players," said Moyes.
"We are trying to build for the future here and we are hoping Dickson can be very much part of that."