Gareca, who has won Peruvian and Argentine domestic titles with Universitario de Deportes and Velez Sarsfield respectively, was appointed until the end of the qualifiers for the 2018 World Cup in Russia, South American football confederation (CONMEBOL) said.
He returns to management after being out of the game for six months following an unsuccessful stint with Brazilian club Palmeiras.
"I believe in the Peruvian players and that is what led me to make this decision," Gareca said in a statement.
"This is the most important challenge of my life. We have a hard and complicated task ahead of us but it is not impossible. Nothing is impossible when you are united."
His first game in charge will be a friendly against Venezuela in Miami on March 31.
Peru are in Group C with Brazil, Colombia and Venezuela for the June 11 - July 4 Copa America.
(Reporting by Andrew Downie)
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