Benitez, who left Premier League side Newcastle after failing to agree a contract extension at the end of last month, takes over a team that is in 10th in the CSL following a 3-1 win over fellow strugglers Beijing Renhe on Saturday.
"After a long path... We start a new challenge! I´m happy to begin this new project with Dalian Yifang," he said on his Twitter account.
South Korean Choi resigned on Monday for "personal reasons", Chinese media reported, leaving Dalian free to appoint Benitez.
The Spaniard takes over a squad that features Marek Hamsik, who played under Benitez during his time at Italian side Napoli, as well as former Atletico Madrid winger Yannick Carrasco.
Benitez's first game in charge of Dalian will be on Sunday, when the club take on Henan Jianye in the league.
Last month, Newcastle United said Benitez would leave when his contract expired on June 30. He was expected to depart after failing to agree a contract extension with owner Mike Ashley over the last few months.
The 59-year-old has said his decision to walk away came after he lost trust in its hierarchy.
In an interview with The Times he said: "When I came to Newcastle, they gave me the plans for the new training ground, I was talking to the architect about changing a few things. And after three years... they painted the walls.
"If you want to attract players, it's about the facilities, the contract, the city, the way you treat them, the way you treat the agents."
(Reporting by Michael Church, Editing by Peter Rutherford)
