The Spaniard most recently managed Real Madrid, but left the club by mutual consent after just seven months in charge.
His greatest success came at the helm of Bayer Leverkusen, where he guided the German side to its first-ever Bundesliga title - without losing a single game in the division.
Alonso also has an impressive playing career, having turned out for the likes of Madrid, Liverpool and Bayern Munich.
His packed trophy cabinet features two Champions Leagues, three Bundesliga titles as a player, an FA Cup and a La Liga triumph - as well as the 2010 World Cup and back-to-back European Championships with Spain.
Alonso's appointment comes just one day after Chelsea lost 1-0 to Manchester City in the FA Cup final, meaning no trophies for the Blues in the current campaign.
"Chelsea Football Club is delighted to announce the appointment of Xabi Alonso as Manager of the Men’s Team.
"The Spaniard will begin his role on July 1, 2026, having agreed a four-year contract at Stamford Bridge.
"His appointment reflects the Club’s belief in his broad set of experiences, coaching quality and game model, leadership attributes, character and integrity, which were key to the decision to ask him to help lead the next phase of Chelsea’s journey.
"He is regarded not only as an outstanding football coach, but also as a proven leader and partner across a number of areas essential to the demands of driving the team."
Alonso will start at Stamford Bridge on July 1st, 2026, and will look to guide Chelsea back towards success after a rough campaign for the Blues.
"From my conversations with the ownership group and sporting leadership, it is clear we share the same ambition. We want to build a team capable of competing consistently at the highest level and fighting for trophies," he said.
"There is great talent in the squad and huge potential at this football club and it will be my great honour to lead it. Now the focus is on hard work, building the right culture and winning trophies."
Alonso becomes the sixth permanent manager to take charge at Stamford Bridge in the past four years after Thomas Tuchel, Graham Potter, Mauricio Pochettino, Enzo Maresca and Liam Rosenior.