The new deal will keep Edwards at the Molineux until the summer of 2017.
Wolves head coach Kenny Jackett told the club website: “I’m delighted that Dave has extended his contract, he’s been a key player in my time here with some fantastic performances and some vital goals.
“With so many younger players around Dave’s experience and leadership are going to be vital for the coming season.
“He brings a lot to the club, his leadership and personal qualities are very, very high.
“He got eight goals last year and he’ll be wanting a role in the team where he can get in the box on a regular basis.”
Edwards admits he is delighted to have signed a new deal with the club.
“It’s great that the club feel that I’m worthy of having that extra year,” Edwards said.
“It’s such a huge club with big ambitions, to think that I’m part of that makes me proud.
“I’m just taking it a day at a time at the moment and that little bit of security’s great for me.
“It’s nice not having to go into the last year of your contract not knowing what’s happening.
“You’re only one big injury away from having your life turned upside-down.
“It’s nice to have that security, I feel in a really good place with my body.
“My form as well, I feel as though I’m playing to the best of my career in terms of having an impact on games and scoring goals.
“I’m in a good place at the moment and hopefully it can continue.”