A plot of tree-covered land the size of a football pitch has been earmarked off Gorsebrook Road, Whitmore Reans, which will allow them to stay for up to 28 days when they arrive in the city.
The council agreed to develop a transit site after the High Court passed an injunction against illegal traveller encampments at 60 sites across Wolverhampton.
Interactive map shows site of the land:
But concerns have been raised about the proposed location of the plot, with Tory parliamentary candidate Stuart Anderson and local residents questioning why a deprived area of the city has been chosen.
The council's environment boss, Councillor Steve Evans, said he understood there would be concerns about the plans, but insisted the authority was at the mercy of the courts.
“We have identified a possible location to develop a transit site in Wolverhampton," he said.
“This is a requirement ordered by the High Court – without a transit site in place, we are not holding up our end of the agreement.
“It has been twelve months since we have obtained the injunction and I’m pleased to have seen a vast reduction in traveller incursions.
“By developing a transit site, we are providing travellers with a place to stay short-term as well as reducing incursions in the city."
Mr Anderson said: "I have absolutely no problem with the traveller community, and it is clear they do need a transit site.
"However, St Peter's is a ward with some of the highest unemployment and deprivation in the city, so why put the site here?
"I will be working with residents and hope that the council takes their views on board before pressing ahead with this development."
'Residents kept in the dark'
Whitmore Reans resident Sohail Khan, a Tory councillor in Tettenhall, urged the authority to reconsider the plans.
"Residents have been kept in the dark over this, with some not even getting letters notifying them of the council's plans," he said.
"Whitmore Reans has enough problems without this transit site."
It is understood that a number of other plots were considered.
A site in Shaw Road was ruled out due to it being too expensive, while land in Fowlers Park was not supported by West Midlands Police due to its location next to the permanent gypsy site at Showell Road.
A third site in Anchor lane was found to be subject to alternative planning proposals.
The Gorsebrook Road site is understood to have been backed by West Midlands Police.
The injunction came after the city had been blighted by rubbish and damage caused by illegal encampments, which the council says cost taxpayers around £350,000 a year.
It banned travellers from sites including Pendeford Business Park, Bilston Urban Village and Windsor Avenue Playing Fields.
The number of unauthorised camps in the city has fallen by 75 per cent in the 12 months since the injunction came into force.
All four Black Country councils are attempting to stop illegal encampments by opening transit sites. Sandwell already has one near Black Patch Park in Smethwick, while Dudley and Walsall are seeking suitable locations.
The council is hosting a meeting for local residents and business to discuss the plans. It will take place at the Holiday Inn at Wolverhampton Racecourse on October 7, from 6.30pm to 7.30pm.
A drop-in session will be held at Gatis Street Community Centre on October 16 from 3pm to 6pm.