The 61-year-old Spaniard will take over from interim coach Colin Miller after the CONCACAF Gold Cup which begins on Sunday.
"The Canadian Soccer Association is thrilled to bring such an accomplished soccer mind to lead our next phase of development in the men's national team programme", said CSA president Victor Montagliani.
"Benito Floro is renowned for his tactical and strategic approach to the game and his influence in implementing a more attacking style of football in Spain.
"We are confident he will provide a strong leadership in the development of Canada's men's game, as well as complement and elevate the work that our technical department, led by Tony Fonseca, is already doing."
Canada fired Stephen Hart after their World Cup qualification campaign ended following an 8-1 crushing by Honduras in the third round of CONCACAF qualifiers.
The much-travelled Floro has worked at 16 clubs in a career which included being in charge at Real Madrid from 1992-1994 and spells with Spanish clubs Villarreal, Albacete and his hometown side Sporting Gijon.
"I hope to fulfill all the goals of the country; it will be difficult but we are going to work towards that with a lot of vision," Floro told a news conference.
Floro's most recent club was Wydad Casablanca in Morocco and he has also worked in Mexico and Ecuador.
The Spaniard will take over the reins on Aug. 1 and will also have head coaching duties for Canada's Olympic (Under-23) team. He will be assisted by his son Antonio Floro Esteve.
Canada have not qualified for the World Cup since their solitary appearance in the finals in 1986.
The Canadians face Martinique on Sunday in their Gold Cup opener before playing Mexico and Panama in their other group games.
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