He is set to replace Stephen Crainey following the Scotsman's departure from Bloomfield Road.
Hill started his career with home town club Bristol City and has also played for Wolves and on loan at QPR.
Hill, whose contract has an option for a further year, has joined Blackpool at their pre-season training camp in Portugal.
Former Manchester United winger, Bojan Djordjic is Blackpool's only other summer signing.
Preston boss Phil Brown had also held talks with Hill about a return to Deepdale.
Source: BBC Sport
Source: BBC Sport