The 24-year-old midfielder joined Wolves on a season-long loan from Anderlecht last August, with the club having an obligation to sign him this summer.
And after taking a while to break into the team, he made a big impression as Nuno Espirito Santo's side reached the FA Cup semi-finals and finished seventh in the Premier League.
"He came in a bit later in the window and took time to settle and get used to the way in which we operate and play," said Thelwell.
“But since he broke into the team he’s been terrific.
“He’s very professional, very honest and very hard-working, so he fits the team perfectly."
It is understood the fee Wolves have paid for Dendoncker is £12million. The club have not announced the length of the deal.
He made 26 appearances during his debut season at Molineux, scoring twice.
After two outings in the League Cup in August and September, Dendoncker had to wait another three months for his league debut, coming on as a substitute in a 2-1 win over Chelsea.
But then he never looked back and was a regular member of the starting line-up in 2019.
"I believe a lot of the success we had in the second part of the season was down to a big contribution from him," added Thelwell.
"There was always an obligation to turn Leander’s deal permanent, so we’re delighted it’s worked out the way it has. He has been a welcome addition to the group.”
Before joining Wolves, Dendoncker played almost 200 times for Anderlecht in his homeland after coming through their youth system, making Champions League and Europa League appearances along the way.
He made his Belgium debut in 2015 and played against England in the group stages of last summer's World Cup. Dendoncker has eight caps in total.