Tiafoe was seeded 10th at Wimbledon last year, but he has since dropped down the rankings and suffered second-round exits at this year’s Australian Open and French Open.
Now 29th in the world rankings, he frustrated Alcaraz throughout and received the early backing of crowd after coming back from a break down to take the opening set.
“He is a really talented player, really tough to face,” Alcaraz added. “He deserves to be at the top, he deserves to fight for big things.”
Alcaraz, who had not dropped a set at the Championships until then, regained control in the second, but a single break of serve was enough for Tiafoe to win the third.
The American waved to the crowd and pointed to his ears, calling for more noise under the closed Centre Court roof.
The fans willingly obliged, cheering on the 26-year-old through the fourth set until it reached a tie-break after both players’ serve held firm.
Sensing the crowd were on his opponent’s side, Alcaraz whipped up emotion with cries of “vamos” after striking huge winners and he cruised his way through to force a decider.
From there it was plain sailing for the three-time major winner, who broke twice before raising his arms in celebration after sealing the victory with a delightful drop shot.
He will play American Brandon Nakashima or French 16th seed Ugo Humbert in the fourth round.
Like other matches on the outside courts, Nakashima and Humbert’s third-round tie was suspended because of the weather, with the fourth set heading to a tie-break.
Queen’s champion Tommy Paul, the American 12th seed, was able to complete a 6-3 6-4 6-2 win Alexander Bublik on court two before the rain arrived.
Meanwhile, Bulgarian 10th seed Grigor Dimitrov moved past Frenchman Gael Monfils 6-3 6-4 6-3 under the closed Court One roof.