The 44-year-old former FC Cologne boss will officially take control at Wolves on 1st July.
Wolves have been without a permanent manager since Mick McCarthy was sacked in February.
Wolves chief executive Jez Moxey told the club’s official website: “Following talks with Stale Solbakken I am happy to confirm that he has agreed to become our new manager.
“He will be formally introduced to the media on Monday.”
Solbakken added: “I am delighted to be taking up the important challenge to manage Wolves.
“It’s an exciting opportunity to manage a great club and I can’t wait to get started.”
Solbakken was sacked by Bundesliga side Cologne last month.