The 80-year-old, who had a run-in with British media over England's failed bid to host the 2018 World Cup finals, was elected unanimously at an extraordinary AFA congress attended by 46 club directors at AFA headquarters.
A small group of protesters gathered outside the AFA's downtown Buenos Aires offices to demonstrate against a man they see as a dictator who has long outstayed his welcome.
"In 32 years here we have done our job and I hope that in the future nothing changes," said Grondona, who famously wears a ring with the words "Everything changes" engraved on it.
"I'm happy to have the good fortune to keep working with the support of all of you," local media quoted him as saying at the assembly.
Grondona, or "Don Julio" as he is popularly known, began his career as a football director in 1956 when he founded Arsenal, now a top flight club, which he presided over in the lower divisions until 1975.
Between 1976 and 1979, Grondona was president of leading club Independiente, the team he supports as a fan and his stepping stone to the top job in Argentine football.
He was elected to the AFA chair in 1979, a year after Argentina won the World Cup for the first time.
He went on to preside over their second world crown in 1986, the Copa America victories of 1991 and 1993, their last major title, and the country's first Olympic football gold medals at the Athens Games in 2004 and Beijing in 2008.
Grondona called the English "liars" and "pirates" at the FIFA Congress in Zurich in June. Football Association Chairman David Bernstein said earlier this month the Argentine had sent him an apology, retracting his remarks.
