Former Spain, Real Madrid and Sevilla coach Lopetegui replaces caretaker manager Steve Davis, who was put in charge of the team following Bruno Lage's dismissal last month.
Lopetegui will take up the role after the club's league fixture against Arsenal on November 12.
"Julen is a top coach, with excellent experience at an elite level of the game, and we are very pleased to have agreed a deal to bring him to Wolves," Wolves chairman Jeff Shi said in a statement.
"Since the very beginning, Julen has been our number one choice to manage Wolves, and we look forward to welcoming him and his team when they join us in the coming weeks."
Wolves, 19th in the league standings with 10 points from 13 games, host Brighton & Hove Albion later on Saturday.
