He said when he asked Conrad Murray what had happened, the doctor said, "He had a reaction - a bad reaction."
Another bodyguard testified Tuesday that both of Jackson's children, Paris and Prince, witnessed Murray trying to revive Jackson's lifeless body.
Alvarez said Paris yelled out, "Daddy!" and started crying. Alvarez went on to say that Jackson appeared dead, yet Murray did not immediately instruct him to dial 911.
When asked by the prosecutor what Alvarez noticed in Jackson's bedroom, the bodyguard said he saw an IV stand next to the bed and a plastic tube attached to Jackson's genitals. The prosecutor asked if it was a "condom catheter" and Alvarez said he did not know.
A paramedic also testified, saying Murray failed to tell him critical information about Jackson when he arrived.
Richard Senneff said he asked Murray what the underlying medical condition was, but Murray didn't answer, then said there wasn't any. Senneff said Murray never mentioned he had given propofol to the singer.
Murray is accused of giving Jackson a lethal dose of the powerful sedative propofol. According to prosecutors, Murray admitted that for two straight months prior to the 50-year-old's death, he gave him propofol nearly every night to help the singer sleep. The drug is typically used in hospitals to put patients under for serious surgery, not to treat insomnia.
Alvarez's testimony could provide key corroboration to the prosecutors' argument that Murray's actions demonstrated "an extreme deviation from the standard of care" by administering propofol without the proper equipment, and also concealing it and botching efforts to resuscitate the singer.
The 57-year-old Houston cardiologist has pleaded not guilty to the charge of involuntary manslaughter.
Prosecutors began their case Tuesday with the first of what could be a star-studded lineup of witnesses. The first person to take the stand was Kenny Ortega, the director of Jackson's "This Is It" tour and movie.
Ortega testified that Jackson seemed unwell and not in good condition six days before he died and went home early from rehearsals at Ortega's suggestion.
Ortega said he was called to Jackson's home the next morning, where Murray told him not to try to be Jackson's doctor or psychiatrist. Murray suggested Jackson should not have been sent home because he was physically and emotionally fine, Ortega testified.
"The key to Kenny Ortega is really that the D.A.'s office wanted to start with some star power - the director of a huge hit movie. They wanted to show the public, they wanted to show the defense, that hey, people are lining up, stars are lining up, powerful people are lining up to testify against you, Dr. Murray," said ABC News legal analyst Dana Cole.
The prosecution also said records show that Murray was on the phone with someone for 11 minutes before he noticed Jackson not breathing and that it would take another 11 minutes before Murray called a security guard.
Murray's attorneys contend that he did not give Jackson anything that should have killed the singer.
The hearing is expected to last at least three weeks. Then, it will be up to Superior Court Judge Michael Pastor to determine if there is enough evidence for Murray to stand trial.
If Murray is convicted, he could face up to four years in prison and lose his medical license.
The Associated Press contributed to this report.