The 33-year-old Portugal star has featured in every Premier League fixture since joining from Monaco in the summer of 2018, and was voted the fans' player of the season last term.
His deal was due to expire at the end of the season, but he has committed his future to the club and said: "It was a very easy decision because I feel very good here.
"It’s a big club that wants to do something good and I want to do my best to help.
"We did a great job last season and this season we’ll try to do better. That’s what we’re going to do and I’m going to try 100 per cent to help the club to improve."
Moutinho, who scored in the 2-1 win at Bournemouth this afternoon, added: "I feel very good. We won, a very important win, and I signed a new contract.
"I’m very happy to help the team and I hope to help the new for the new two, three years.”
Euro 2016-winner Moutinho often grabbed the spotlight last campaign, coming up with eight assists and a stunner at Manchester United to clinch the player of the season gong.
And the top-drawer performances have continued, with him coming up with a fantastic free-kick against the Cherries to get off the mark this term.
Wolves sporting director Kevin Thelwell said: "It’s terrific news.
"In the time here’s been here, everyone has been able to see he’s a top player.
"Top performances on the pitch, top professionalism off the pitch.
"He has an amazing mentality and has made a really big impression on everyone at the football club."
Thelwell added: "He’s been pretty much available for every training session, available for every game, and he’s showing no signs of slowing up whatsoever.
"We are delighted he’s decided to commit himself to us for the foreseeable future."