It will be Lopetegui's first coaching job since being fired by Real Madrid last year, shortly after being fired by Spain's national team.
Lopetegui had a dismal stint with Real Madrid, winning only six of 14 matches. His final game was a 5-1 loss to Barcelona at the Camp Nou in October.
He had been praised for his job with Spain's national team but was let go right before the World Cup for taking the Madrid job without letting Spanish federation officials know in advance.
The 53-year-old former goalkeeper began his coaching career with Madrid club Rayo Vallecano in 2003-04. He spent two seasons with Portuguese club Porto before taking over the Spanish national team.
Sevilla finished sixth in the Spanish league, securing a Europa League spot for next season.