Osorio will lead Paraguay "in commitments on FIFA dates, at the 2019 Copa America in Brazil and for the qualifiers for the Qatar World Cup 2022," the APF said.
The 57-year-old has coached club sides in his native Colombia, Mexico, Brazil and the United States. He was appointed Mexico coach in 2015 and stood down after the World Cup.
Paraguay have not qualified for the World Cup since reaching the quarter-finals in South Africa in 2010.
(Reporting by Andrew Downie, editing by Pritha Sarkar)
