Alvarez had been under pressure since failing to qualify the side for the group stages of the Champions League last month and Sunday's 2-0 La Liga defeat at promoted Hercules proved the final straw.
Manzano, who led cash-strapped Real Mallorca to fifth in the championship last season before quitting, will take charge of his first training session on Monday evening.
The 54-year-old brings with him over a decade of top-flight experience, most of that from two spells with Mallorca, with whom he won the King's Cup in 2003.
He was promoted to replace Manolo Jimenez on a temporary basis back in March, and steered the side to a 2-0 victory over Atletico Madrid in the King's Cup final and fourth place in the league last May.
A 1-1 draw against Racing Santander at the Sanchez Pizjuan on Thursday ended with disgruntled fans chanting for him to go, and although Sunday's defeat was his first of the league campaign the club decided to act.
