Four men were found hiding in a lift shaft at the Diamond Banqueting Suite in Skinner Street when police raided the building on Wednesday afternoon.
Around 700 cannabis plants were growing across the former cinema and bingo hall's four floors after it was converted into a drugs factory.
Officers raided the building on Wednesday afternoon after being alerted to suspicious activity.
It is the second cannabis farm to have been discovered in the heart of Wolverhampton city centre in recent years, after around 200 plants were found growing in the old Nationwide building in Queen Square.
The four men hiding inside the Diamond suite, aged between 18 and 30, were all arrested on suspicion of cultivating cannabis.
They remained in custody on Thursday while officers from West Midlands Police continued to examine the building.
Three officers were seen wearing white hazardous waste suits and face masks on Thursday morning as they entered the banqueting suite, which has four floors and can hold up to 750 guests.
The Diamond Banqueting Suite has been a featured entertainment venue in Wolverhampton for more than 80 years.
Opened in 1937 as an Odeon cinema, the Grade II-listed building has lived a number of different lives. The centre reopened as a Mecca Bingo hall in 1983 after the cinema closed, before becoming the banqueting suite in 2009.
Its three suites have been used for events such as weddings, Christmas parties and corporate events, as well as professional wrestling, boxing and mixed martial arts events and concerts.
The last event held at the banqueting suite was a martial arts evening on March 14 last year and the suite has laid dormant since then.
A West Midlands Police spokesman said: "We've arrested four men after finding a cannabis factory at the Diamond Banqueting Suite in Skinner Street, Wolverhampton, at about 3.40pm yesterday.
"Officers were called to suspicious activity at the premises and discovered around 700 plants and growing equipment.
"On searching the building, four men were found hiding in a lift shaft.
"Four men, aged 18, 24, 29 and 30, were arrested on suspicion of cultivating cannabis and remain in custody for questioning as enquiries continue.
"Anyone with any information can message us via live chat at west-midlands.police.uk, call 101 or speak to Crimestoppers anonymously on 0800 555 111, quoting crime number 20/105335/21."