In addition to Volquez, the Padres acquired pitcher Brad Boxberger, infielder Yonder Alonso and catcher Yasmani Grandal -- all of whom were named among the Reds' top 10 prospects by Baseball America.
"Our young starting pitching depth allowed us to make a move like this," said Padres general manager Josh Byrnes in a statement. "We've added four credentialed young players who can help us win in the short and long term."
Latos, 24, was the Padres' best young pitcher who had established himself in the majors, and is one of the most promising right-handed pitchers in baseball. He has posted a 27-29 record and 3.37 earned run average in three seasons for the Padres, while striking out 413 and walking only 135 in 429 2/3 innings.
After going 14-10 with a 2.92 ERA in 2010, he experienced a slight regression last season, with a 9-14 record and 3.47 ERA. His strikeout-to-walk ratio of 185-to-62 was slightly worse than 2010, when he fanned 189 and walked 50.
But the Reds valued him enough to send four players to San Diego.
Volquez broke into the majors with Texas in 2005 but rose to prominence in 2008. That was his first year with the Reds, and he went 17-6 with a 3.21 ERA.
However, the right-hander has struggled over the last three seasons because of injury and a 50-game suspension for using performance-enhancing drugs. Volquez, 28, went 5-7 with a 5.71 ERA in 20 starts for the Reds last season.
Boxberger, 23, split last season between the Double- and Triple-A levels. The right-handed reliever posted a 2.03 ERA in 55 total appearances, with a 2-4 record and 93 strikeouts in 62 innings.
The Southern California native was chosen 43rd overall in the 2009 draft by the Reds.
Alonso was the seventh selection in the 2008 draft out of the University of Miami, and has appeared in 69 games in two seasons with the Reds. He showed signs of promise last season by hitting .330 with a .398 on-base percentage and five homers in 47 major league games.
The 24-year-old spent most of the season with Triple-A Louisville and hit .296 with a .374 OBP and 40 extra-base hits in 91 contests.
The Reds picked Grandal, who also played for the Miami Hurricanes, 12th overall in the 2010 draft.
He played at three different levels within the Reds' minor league system in 2011, batting .305 in 105 games. The switch-hitter also posted a .401 OBP, 14 homers and 68 RBI.
In conjunction with the trade, the Padres designated catcher Luis Martinez for assignment.