She will replace Sarah Sands, who is moving to the Evening Standard in August having been appointed its deputy editor in February.
Hudson, who described the opportunity to work at Reader's Digest as "just too good to miss", said the magazine has potential for growth.
A major relaunch under Sands in late summer of 2008 has not yet shown any positive impact on the magazine's circulation, which fell 1.9% between the first half of 2008 and the second half of the year to 602,609, according to the latest magazine ABC figures.
Hudson has edited a number of titles and launched three -- Eve for BBC Magazines, and men's magazines Maxim and Stuff for Dennis Publishing.
She is also a past winner of PPA and British Society of Magazine Editors editor of the year awards.
Chris Spratling, managing director of Reader's Digest, said: "We are absolutely delighted to have secured the talents of such an experienced and celebrated editor as Gill.
"Her achievements across a broad range of magazines are unrivalled and we're confident that she will make a huge impact at Reader's Digest."
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