The 18-year-old Netherlands youth international has signed a five-year deal after making a switch reported to be worth in the region of £10 million ($17.7 million).
Hoever joined Liverpool from Ajax in 2018 and made his debut at Molineux last January, 11 days before his 17th birthday.
That saw him become the club's youngest ever player as Jurgen Klopp's side went down to an FA Cup third-round defeat.
Hoever marked his fourth start with a goal against MK Dons in last season's Carabao Cup and made four competitive appearances for Liverpool overall, also featuring as part of the squads that lifted the UEFA Super Cup and FIFA Club World Cup in 2019-2020.
"Wolves came with the best plans for me," Hoever told Wolves' official website "I'm hoping I can make it to the next level with them and achieve great things with them. It's a big season ahead and I hope we can achieve great things.
"They had a few brilliant seasons in the Premier League, and they are one of the top teams that's fighting for the [UEFA] Champions League. I really want to be a part of that with this club and really want to get this club to the next level – that's why Wolves was the decision that I made.
"Of course, this is a special place for me because I made my debut in professional football here. I'm really excited to be playing here and not get shouted at but cheered at. It's a really nice stadium, I just hope that the fans can join us soon and support us as well."
Speaking ahead of Tuesday's (AEST) Premier League encounter with Manchester City, Wolves boss Nuno Espirito Santo explained the departure for former Atletico Madrid forward Jota to the Premier League champion – reportedly for £45 million ($79.8 million) – was essentially a done deal.
"Diogo is amazing – everyone knows that – and the three seasons at Wolves, what he did for us was fantastic," he said.
"Things happen when naturally they should happen. He's going to the right place. He'll never be forgotten by our fans."