As widely reported, Pereira, who has signed an 18-month contract, was Wolves' ideal candidate to succeed the sacked Gary O'Neil.
The English club will even pay the termination clause of Pereira, who has been in charge of Saudi Arabian club Al Shabab since February, having renewed his contract in June for another season.
O'Neill was let go on Sunday after 16 months in charge of the English club.
The former Porto coach Pereira had already been close to coaching in England and even met with Everton, but the situation never progressed.
"Pereira, who departs Saudi Pro League club Al Shabab, has taken training at Compton Park for the first time on Thursday and will be in charge when Wolves travel to Leicester City this weekend," the club said in a statement.
Pereira faces a tough task to get Wolves' season back on track, with the team having the worst defence in the league after conceding 40 goals.
They have also had disciplinary issues in recent weeks, with Mario Lemina being stripped of the captaincy after an altercation with West Ham United forward Jarrod Bowen.
Wolves winger Matheus Cunha was charged by the Football Association for clashing with an Ipswich staff member.
'Challenging moment'
"This is a challenging moment for the club, and we want to thank Vitor for taking on this responsibility," Wolves chairman Jeff Shi said.
"We have full confidence in his ability to guide us back on track, alongside the players and staff, and the entire club will be united in supporting him to achieve success."
The manager's first game in charge will come on Sunday, December 22nd against Leicester.