The 24-year-old, who has spent eight years at Deepdale, has signed a two-and-a-half-year contract with a option for a further 12 months.
Head coach Lee Johnson said: "Bailey has a warrior spirit and represents a good signing for us.
"He has great Championship experience, he's tough, an Australian international - an old-fashioned stopper."
In December, Preston manager Simon Grayson said he was keen for Wright to sign a new deal at Deepdale and that the defender "owes the club a lot".
Wright was part of the Preston team which won promotion via the League One play-offs in 2014-15.
Since scoring on his Australia debut against Saudi Arabia, he has been capped 12 times and was in the squad for the 2014 World Cup in Brazil.
Wright is Bristol City's third signing of the January transfer window, with Bosnian striker Milan Djuric and German midfielder Jens Hegeler already added to the squad.
Find all the latest football transfers on our dedicated page.
Bristol City have signed Australian centre-back Bailey Wright from Preston North End for an undisclosed fee.