Daniel, 27, who captained the Sharks to the Super Rugby final this season, has made three substitute appearances for the Springboks since making his Test debut against Ireland in 2010.
Daniel starts in place of the Pierre Spies, who was ruled out of the tournament on Tuesday with a finger injury.
While Daniel has experience at the back of the scrum, his regular position is as a flanker and concerns have been raised that, at 1.88 metres and weighing 94 kgs he may be too small for the international game.
Springboks coach Heyneke Meyer rejected these suggestions on Wednesday and clearly has no qualms about Daniel's ability to perform at the highest level.
"Keegan has been playing really well in Super Rugby and he has put up his hand," Meyer told a news conference in Cape Town.
"It is a setback losing someone of Pierre's experience but I think that Keegan is the logical choice to replace Pierre. It is a step up and it is in his hands now to see if he can play at this level. What you lose in physicality with Keegan you gain with the X-factor he brings to the team," he added.
South Africa's starting XV to face Argentina features six changes to the team who drew 14-14 with England in the third Test in June.
Fullback Zane Kirchner, wing Lwazi Mvovo, inside centre Frans Steyn, flanker Willem Alberts, lock Andries Bekker and Daniel are included while there are two possible debutants on the bench in prop Pat Cilliers and centre JJ Engelbrecht.
"Lwazi has been impressive this year and I know he can fill the huge boots of JP," Meyer said.
Meyer also confirmed that hooker Chiliboy Ralepelle had been ruled out of the first two weeks of the competition with a knee injury. The Stormers' Tiaan Liebenberg, who is uncapped, has replaced Ralepelle in the squad.
South Africa: 15-Zane Kirchner, 14-Lwazi Mvovo, 13-Jean de Villiers (captain), 12-Frans Steyn, 11-Bryan Habana, 10-Morne Steyn, 9-Francois Hougaard, 8-Keegan Daniel, 7-Willem Alberts, 6-Marcell Coetzee, 5-Andries Bekker, 4-Eben Etzebeth, 3-Jannie du Plessis, 2-Bismarck du Plessis, 1-Tendai Mtawarira.
Replacements: 16-Adriaan Strauss, 17-Pat Cilliers, 18-Flip van der Merwe, 19-Jacques Potgieter, 20-Ruan Pienaar, 21-Pat Lambie, 22-JJ Engelbrecht.