Preciado was sacked by Sporting in January after five-and-a-half years in charge, but had been handed the task of leading Villarreal back into La Liga this week.
He was due to be presented to the media at El Madrigal on Friday, but Sporting released a statement to announce that Preciado had passed away at the age of 54.
During his playing career, Preciado was a defender for the likes of Racing Santander, Linares and Alaves before he retired in the early 1990s.
Preciado also had two spells as a coach of Racing, while Gimnastica and Levante were among his other clubs before he took over at Sporting in 2006.
He had kept Sporting in the top flight in recent seasons before his departure earlier this year and Villarreal were hoping he could work his promotion magic with them.
Villarreal had previously dismissed Jose Molina in March and his replacement Miguel Angel Lotina was unable to prevent relegation from La Liga.
The Yellow Submarines finished fourth in the 2010/11 Primera Division season and reached the Champions League semi-finals in 2006, and the Europa League semi-finals in 2011.
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