Madison is slated to start performances in the stage show, which is billed as a "striptease spectacular," June 22.
Madison is known for her work on the TV series "The Girls Next Door" and "Dancing with the Stars."
She is expected to take over the role of Bo Peep, "a modern woman who has yet to find her own confidence and sexuality," BASE said in a news release.
The role is currently played by "General Hospital's" Kelly Monaco, a "Dancing with the Stars" champion.
"It's always been a dream of mine to be in a classy burlesque show," Madison said in a statement. "I'm really thrilled to be a part of 'Peepshow' and to get a chance to work with a choreographer like Jerry Mitchell. I want to thank BASE Entertainment for the opportunity. I can't wait to get to Planet Hollywood and get started."
"We are thrilled to have Holly Madison join 'Peepshow,'" said Scott Zeiger, co-chief executive officer of BASE Entertainment. "She is the perfect addition to our stunning lineup and she will bring her own special talents to the stage at Planet Hollywood."