The 20-year-old centre-half joins from Atletico Nacional in his homeland, for a fee of around £4.5million.
He comes in as the first buy of the Bruno Lage era and will join up with the first-team squad for the start of pre-season on July 5.
Wolves technical director Scott Sellars said: "We’ve been monitoring Yerson for quite a while, and there has been a lot of interest from clubs across Europe, including some of the biggest names in the Premier League.
"They all see his potential and quality, as do we, but we spoke to him about the pathway we have at the club, and he believes Wolves is the best fit for him.
“He’s a centre-back who’s very athletic, very aggressive, very competitive and has a great attitude to defending – he wants to defend, he wants to make tackles and headers, and has great presence in both boxes, but he’s also very good technically and very composed on the ball.
“He’s certainly a player with a high ceiling, someone who is highly regarded in Colombia and we believe the attributes he has will fit very well into the Premier League and into our squad.
“Our new head coach Bruno has been involved in the process, has looked at the player, and together we feel Yerson has the perfect profile to come in and improve the depth of the squad.”
In signing Mosquera, Wolves utilised new government rules which allow access to young talent outside the European Union.
He is seen as a potential star in defence for Colombia in the future.
Sellars added: “There’s evidence of Colombian players who have come in and done very well in the Premier League over the last few years.
“Before Brexit, we couldn’t go into South America unless it was to buy very established players.
"We would’ve had to wait for a player to spend time developing at another club, and for their value to go up substantially before we could bring them in.
“But under the new rules, we can bring these talented young players into the club earlier in their careers, develop them here by giving them minutes in the first-team and have them competing with our own players, and this way increasing their market value ourselves.”