Alpacas are part of the Camelidae family, with camelids first appearing in North America about 40-45 million years ago. There are two distinct camelid subtypes and both descend from the Protylopus,a camelid ancestor. From this ancestor, arose the Camelini and Lamini camelids, with the Camelini being present in Asia and Africa, and the Lamini being present in South America.

About 2.5 million years ago, the Lamini genus Hemiauchenia, a genus of lamine camelids, migrated to South America, later separating into Palaeolama and Lama tribes. The Lama tribe split to become the Vicuña and Guanaco. Today, the Vicuña is found in Bolivia, Peru and Northern Chile, while the guanaco in Chile and Argentina. The vicuña is known for having an incredibly fine and luxurious fiber. They roam free in the wild, being a protected species in parts of Bolivia and Peru.

DNA evidence shows that the alpaca descends directly from the vicuña and that ancient civilizations bred them for over 5,000 years. The alpaca was bred for its soft & luxurious fleece, unlike its larger cousin the Llama which was used for transporting goods. Alpaca fiber was preserved only for royalty and was known as the "The Fiber of the Gods".

The alpaca population was nearly decimated, after Spanish forces first invaded the Incan civilization in 1532. The conquest would last nearly 40 years and during this time, the invaders killed most alpacas as source for meat along with sheep and cattle, not understanding the value of the alpaca fiber. The alpaca would have become extinct, if not for a few herders that managed to escape after retreating to the nearby mountains. This helped preserve alpaca genes for future generations.

In the early 19th century, the alpaca once again became famous for its luxurious fiber, this time for British royalty. Alpaca was introduced in the UK in the early 1800s, but it was was not until 1836 that Sir Titus Salt introduced it into the marketplace. He was able to create a soft and luxurious garment after experimenting for 18 months. He later presented an alpaca coat to Prince Albert for Queen Victoria. As a result, demand and interest in alpaca fiber would later surge.

Today, alpacas can be found globally with most of them living in the altiplano regions of Peru, Bolivia, and Chile. Alpacas are still raised by descendants of the Incas in small herds in open areas. These families devote their lives to raising and taking care of their alpacas in the most sustainable way. Their farming methods are based on ancestral knowledge of the Incas. The alpaca not only provides sustenance to farmers but also helps in preserving the ecological balance. Today, government programs are working on improving the quality of alpaca quality using genetic testing.