The Portuguese has had a successful hearing and is now eligible to succeed Nuno Espirito Santo at Molineux.
Former Benfica chief Lage did not automatically qualify for a work permit because of new rules implemented since Brexit, but he passed after an application was submitted to the FA.
The 45-year-old attack-minded coach, a client of Jorge Mendes, is the clear frontrunner for the job and highly likely to be appointed by Wolves.
Lage’s contract details still need to be sorted out while his backroom team would also have to be granted work permits.
But it is believed those processes should go through smoothly ahead of a formal announcement.
The club have already held discussions with Lage and are attracted by his expansive style of play.
They are also hoping to carry on the Portuguese-heavy culture developed during Nuno’s four-year reign and not start from scratch with a head coach of different nationality.
Wolves would be the second club that Lage has managed.
He previously spent 18 months at Benfica in Portugal’s top flight and captured the title in his first season just ahead of Porto, with his side scoring an eye-catching 103 goals along the way.
He was voted the Primeira Liga’s best coach for 2018/19, too, but he was let go last summer following a run of two wins in 13 matches.
Lage has been a free agent since, having also previously worked as an assistant to Carlos Carvalhal at both Sheffield Wednesday and Swansea, and as a youth coach at Benfica.
Ex-Wolves manager Nuno, meanwhile, is entering talks with Everton and is currently the leading candidate to replace Carlo Ancelotti at Goodison Park.
Nuno has also held discussions with Crystal Palace on the back of Roy Hodgson’s departure, but he is now said to have strong support in the Toffees’ boardroom after Ancelotti’s return to Real Madrid.
Majority shareholder Farhad Moshiri is reportedly a big admirer of Nuno and the work he carried out while at Wolves.
Nuno oversaw a Championship title win in his first season at Molineux before back-to-back seventh-placed finishes in the Premier League, along with runs to the FA Cup semi-finals and Europa League quarter-finals.
Last season, though, proved to be more difficult with Wolves finishing 13th and him leaving last month in a move instigated by the club – although it was officially by mutual agreement.