Alpacas are considerably smaller than llamas, and unlike llamas, alpacas were not bred to be beasts of burden but were bred specifically for their fiber. Alpaca fiber is used for making knitted and woven items, much as wool is. These items include blankets, sweaters, hats, gloves, scarves, a wide variety of textiles and ponchos in South America, and sweaters, socks, coats and bedding in other parts of the world. The fiber comes in more than 52 natural colors as classified in Peru, 12 as classified in Australia and 16 as classified in the United States.

In the textile industry, “alpaca” primarily refers to the hair of Peruvian alpacas, but more broadly it refers to a style of fabric originally made from alpaca hair but now often made from similar fibers, such as mohair, Icelandic sheep wool, or even high-quality English wool. In trade, distinctions are made between alpacas and the several styles of mohair and luster.