Alfaro, 58, replaces Dutchman Jordi Cruyff, who took over in January but resigned in July without leading the team in an official match.
Alfaro has a long CV that includes time at many of Argentina’s top clubs, with his last job coming to an end late last year at Boca Juniors.
His first competitive matches will be in October when Ecuador begin their campaign to reach the 2022 World Cup finals.
The South American side last reached the finals in Brazil in 2014.