Lopetegui, who previously coached Wolverhampton Wanderers in the Premier League and will take charge of West Ham on July 1st, replaces David Moyes, who left the London club this month.
West Ham finished ninth in the standings with 52 points and missed out on qualification for European football next season.
"My ambition as a coach is always to be better and better, to achieve more and bigger aims and to encourage and improve the players, the team, and to compete because football is about this – to compete," Lopetegui said in a statement.
"I am where I want to be. I am here because I want to be here and for us it was a fantastic day when we closed our agreement here because our commitment is 100 per cent to be here."
Lopetegui, who was at Barcelona and Real Madrid as a player but featured mostly for Logrones and Rayo Vallecano, began coaching in Spain's youth set-up before spells at Vallecano in the Spanish second tier and Portuguese club Porto.
He took over as Spain coach in 2016 following the retirement of Vicente Del Bosque, but was sacked two days before the 2018 World Cup after agreeing to become Real Madrid manager after the tournament.
Lopetegui was then dismissed by the Spanish giants a few months later following a woeful start to his spell in charge.
His most successful stint in club management came at Sevilla, where he spent three years in charge, leading the LaLiga outfit to the Europa League title in 2020.
The Spaniard took charge of Wolves in 2022 and helped them avoid relegation, but left the Midlands club in August 2023 due to differences of opinion with the owners. British media reported that he was unhappy about the club's financial situation.
West Ham technical director Tim Steidten said Lopetegui was the club's primary target, adding: "His career shows that, wherever he has coached, he has improved players and teams, and we are looking forward to seeing him work with our squad.
"Julen lives and breathes football.
"He thinks deeply about the game, he is tactically astute and he has shown he can adapt to work in different leagues, in different countries, with national teams, and in each situation he has shown his outstanding qualities."
West Ham enjoyed a promising start to the 2023-24 season under former Everton and Manchester United manager Moyes and were sixth at the halfway point of the season but four wins in their last 19 league games saw them slip down the table.
They were also thrashed 5-0 at London rivals Chelsea in May, weeks after a 5-2 defeat away to Crystal Palace, and were eliminated in the Europa League quarter-finals by eventual runners-up Bayer Leverkusen last month.