Punjabi singer Pargan Bhandal entertained the crowds at the free event in Phoenix Park, off Dudley Road, in the Blakenhall area, on Saturday night.
Bhangra music filled the air as a series of performers took to the stage, including Atman Ram and Pamma Bhangra Group. A funfair, food and fireworks also added to entertainment.
Following the turning of the lights after 8.30pm, the Hindu and Sikh festival of lights event ended with a fireworks display.
Wolverhampton's Deputy Mayor Councillor Greg Brackenridge was also in attendance, as well as Blakenhall ward Councillor Jasbinder Dehar, Graisley ward Councillor Asha Mattu and former Wolverhampton South West MP Rob Marris.
Mohan Lal Sharma, president of the Shree Krishna Temple, off the Penn Road, which organises the festival, said: "This event gets more and more popular every year and attracts more and more people here.
"We have all members of the community and everyone turns out to celebrate Diwali – it is an all-community celebration.
"It was a beautiful, peaceful event and we had between 7,000 and 8,000 people turn out. This is the 11th event we have held.
"The lights in Dudley Street were lit up at around 8.30pm, followed by the fireworks display which was beautiful."
Councillor Dehar said: "Diwali is a massive event in the Sikh and Hindu community. It is a celebration of good over evil – out of darkness comes light.
"I just love to see my community out and about and to see them celebrating."
Stuart Anderson, Conservative prospective parliamentary candidate for Wolverhampton South West, who also attended the event, added: "Celebrating Diwali the festival of light in Wolverhampton was so fitting, where we have a motto of out of darkness comes light.
"The communities that come together represent the light that is seen throughout the city. It was an excellent event that I want to see grow year in year."
The event is supported by Wolverhampton Council, the Indian Multicultural Society, Shri Krishan Mandir and Gurudwara Sikh Council, and Gujrati Association.