The deal includes intellectual property rights and certain manufacturing equipment, but Gildan will not be purchasing any retail stores.
The transaction is subject to bankruptcy approval on Thursday and is expected to be completed by early February, Gildan said in a statement this morning.
Shares of the Canadian company were up almost 1% at $25.50 in pre-market trading on Tuesday.
"We see strong potential to grow American Apparel sales by leveraging our extensive printwear distribution networks in North America and internationally to drive further market share penetration in the fashion basics segment of these markets," Gildan CEO Glenn Chamandy said in a statement.
The auction had attracted bidders including California-based apparel maker Next Level as well, Reuters reported.
American Apparel filed for Chapter 11 bankruptcy protection on November 14.
Guggenheim Securities, LLC is acting as Gildan's financial adviser, and Sullivan and Cromwell LLP is acting as legal adviser.