The 43-year-old has agreed a contract at Deepdale to immediately take the reigns at the Club.
He will be joined at the Club by Glynn Snodin, who worked alongside the new PNE gaffer at both Leeds United and Huddersfield Town.
Ripon-born Grayson started his playing career at Leeds United, before moving to Leicester City, where he played over 200 competitive games he spent permanent spells at both Aston Villa and Blackburn Rovers, before joining Blackpool in 2002.
He was appointed manager at Bloomfield Road in 2005, gaining promotion to the Championship, before moving back to Leeds United. He also got the Yorkshire club promoted from League One and did the same at Huddersfield Town last season, defeating Sheffield United in the Play-Off Final.
Snodin, 52, is a former team-mate of Grayson at Leeds, who spent move of his early career at Doncaster Rovers, making over 300 appearances. He spent time at Sheffield Wednesday and Barnsley, as well as a spell north of the border with Hearts.
He has coached with Doncaster Rovers, Charlton Athletic, Southampton, West Ham United and Northern Ireland before joining Grayson at Leeds in 2009.
It has also been confirmed that John Dreyer will remain as part of the new coaching team, working alongside Simon and Glynn with the first team to take the Club forward.