Police found evidence of The Pendulum, in Pendeford, open and officers issued a Coronavirus Restrictions Prohibition Notice on the designated premises supervisor for the breach.
A meeting of the city council's licensing committee today suspended the licence of the pub in Blaydon Road ahead of a full review in a month.
Anyone who ignores a licence suspension can face criminal prosecution and officers are warning of the long-term consequences of breaking the current regulations.
More Covid-19 coverage:
Sergeant Steph Reynolds, from the Wolverhampton Police licensing team, said: "The rules imposed by the Government were very clear, pubs are not to trade for consumption of food or drink on the premises.
"There may be a false belief that it's worth the risk to secretly trade... that you will only be asked to close like everyone else already is if caught.
"But if you do breach the rules you face losing your licence completely and be unable to trade when lockdown restrictions are lifted.
"A breach of the rules can also lead to being taken to court and even a prison sentence."
Councillor Alan Bolshaw, chairman of licensing committee, said: “I am very disappointed that the premises licence holder and designated premises supervisor has appeared to place members of the public at risk, when everyone should be adhering to the restrictions put in place to protect people.
"The decision taken was to support the police in their application to suspend the licensable activities at the Pendulum, Blaydon Road, Pendeford, Wolverhampton. A full review of the premises licence will now take place."
A date for the full hearing is yet to be set.