North End boss Alex Neil had hoped to lure the 23-year-old to Deepdale with an offer in the region of B£300,000.
But his opening bid has now been knocked back by Ibrox chiefs.
Rangers signed Windass – son of former Aberdeen favourite Dean – for just B£60,000 from Accrington Stanley last year.
His first campaign at Ibrox was hampered by injury but his form has picked up considerably this term and he has netted six goals from 23 appearances to date.
Neil has already struck a B£500,000 deal for Motherwell frontman Louis Moult that will see him depart when the transfer window opens on Monday, and was looking to add Windass’ pace to his new-look Preston attack.
Watford boss Javi Gracia does not think Abdoulaye Doucoure's form will be affected by his omission from France's latest squad.