Known affectionately as JIM, Spaniard Martinez left Levante at the end of last season after the Valencia-based club decided not to extend his contract following an 11th-placed finish.
He will be presented to the media on Tuesday, Valladolid said on their website (www.realvalladolid.es).
The coaching job was vacant because Serb Djukic left at the end of last term to take over at Valencia, where he was once a player.
Former Sevilla, Deportivo La Coruna and Athletic Bilbao coach Joaquin Caparros has replaced Martinez at Levante.
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