Wolves manager Bruno Lage was sacked on Sunday after his club plunged into the Premier League relegation zone 24 hours earlier.
Wolves have won only once in eight Premier League games this season and Saturday's 2-0 defeat at fellow strugglers West Ham left them third-bottom of the table.
"Bruno is an excellent coach, a hardworking and dedicated manager, and a warm, wise and honest man," Wolves chairman Jeff Shi said.
"He and his staff have been a pleasure to work with throughout their time at Wolves, so it is with much sadness that we have had to make what has been a difficult decision."
Wolves are the lowest scorers in the top flight, with just three goals, prompting their fans to taunt Lage with chants of "you don't know what you're doing" during the West Ham loss.
Wolved had lost nine of their last 15 Premier League matches under Lage, who won the Primeira Liga title in his first season in charge of Benfica in 2019.
"I honestly have no doubts about Bruno's ability, and I'm sure he will succeed elsewhere, however the team's form and performances over the last few months mean that we have no choice but to act," Shi said.
"On behalf of everyone at Wolves, I would like to place on record our gratitude to Bruno and his coaching team for all their efforts during their time with the club, and wish them the very best for the future."
Lage guided Wolves to a 10th-placed finish last season after succeeding Nuno Espirito Santo in June 2021.
But the 46-year-old has paid the price for a series of underwhelming performances this season despite significant summer investment in new signings from Chinese owners Fosun.
Wolves spent more than £100 million ($111 million) on Sasa Kalajdzic, Matheus Nunes, Goncalo Guedes and Nathan Collins, while Diego Costa and Boubacar Traore joined as a free agent and on loan respectively.
However, Kalajdzic suffered a long-term injury on his debut, while fellow forwards Hwang Hee-chan and Raul Jimenez were also sidelined.
Assistant coaches Steve Davis and James Collins will prepare the Wolves squad this week ahead of Saturday's trip to Chelsea.
Pedro Martins, the former Olympiakos coach, has been linked with a move to Wolves to succeed Lage.