The Portuguese champion has acted quickly in naming Vitor Pereira's successor following the 43-year-old's decision to move to Saudi club Al-Ahli on Sunday.
Fonseca took control of Pacos Ferreira last summer and steered the club to the 2013-14 UEFA Champions League qualifying round courtesy of a third-placed finish in his first season as a top-flight manager.
"It is an honor to represent the champions. I couldn't be happier and it was an easy decision to make," Fonseca told UEFA's official website. "I have ambition. I usually like to play with balance and keep possession – that is the hallmark of my teams. I want my team to dominate at a high tempo, and for that we need solidarity."
Porto recently lifted the Primeira Liga for a third consecutive season, going undefeated en route to the latest crown.