The 20-year-old have not yet made his Premier League debut for the Blues.
The England Under-21 defender spent much of the last two seasons with Queens Park Rangers.
“Michael’s coming in from Chelsea,” confirmed Wolves boss Mick McCarthy to the club’s website.
“I wanted some defensive cover and I want us to stop leaking 14 goals in five games so maybe there has to be a shake-up or re-jig of affairs and let’s see if we can get a formula that works.
“It’s working at the moment in terms of scoring at the other end but we need to keep clean sheets as well.
“It’s all about competition for places as well because Jody (Craddock) isn’t ready yet and won’t be for a few weeks.
“Michael is an England-under-21 international who’s a good defender and is very quick.
“He’s travelling up today so he could be involved in the squad tomorrow but I wouldn’t throw him in without having done some work as a unit beforehand.”