Alcaraz, 19, triumphed 6-7 (6/8), 6-3, 6-1, 6-7 (5/7), 6-3 to become the youngest men's Grand Slam finalist since compatriot Rafael Nadal and set up a final clash with Casper Ruud for the title and world No 1 ranking.
Tiafoe's compelling back story and sensational run in New York, including his fourth-round upset of 23-time Grand Slam champion Nadal, made him the talk of the town.
However, his challenge fell short against the rising star of men's tennis.
"I gave everything I had these past two weeks," American Tiafoe said at the Arthur Ashe Stadium.
"I came here wanting to win a US Open and I feel like I let you guys down. This one really, really hurts. Too good from Carlos. I am going to come back and I will win this thing one day."
Despite the disappointment, Tiafoe said he will walk away from Flushing Meadows with a new sense of confidence.
"I proved that I can play with the best and I'm capable of winning Grand Slams," he told reporters.
Tiafoe fell short of becoming the first Black man from the US in a major final since MaliVai Washington was runner-up at Wimbledon in 1996.
Tiafoe's parents fled civil war in Sierra Leone in 1990s and eventually settled in Maryland, where his father worked as an on-site caretaker at the Junior Tennis Champions Centre. Frances and his twin brother regularly stayed the night, getting to hit balls on the courts.
The semi-final was witnessed by a number of celebrities, including former First Lady Michelle Obama, musician Jon Bon Jovi, and others.