The 29-year-old, who grew up a Liverpool fan and came through the club's academy, has joined Merseyside rivals Everton on a season-long loan with an option to buy.
Coady has fallen out of favour at Wolves after Bruno Lage moved to a back four this summer and favoured Nathan Collins and Max Kilman over him for the opening day defeat at Leeds.
The centre-back now departs in search of game time with one eye on the World Cup in November, as he hopes to make Gareth Southgate's England squad.
Coady has enjoyed seven successful years at Wolves and leaves seven years to the day that he made his debut, away at Blackburn in 2015.
He has made 317 appearances for Wolves and was an instrumental member of the squad that earned promotion back to the Premier League, enjoyed a run to the quarter finals of the Europa League, the semi-finals of the FA Cup and came close to breaking into the top six.
Wolves chairman Jeff Shi said: “Conor has been an integral part of our success over the last five seasons, and loyal servant to the club over his seven years at Molineux. His dedication to Wolves in that time means that we choose not to stand in the way of his desire to play football elsewhere, and he leaves with our best wishes.
“Even when emotionally it can be hard to part after everything we have been through together, it is important for me to look at the wider picture and make difficult decisions. A huge thank you to Conor for everything he has achieved at Wolves, and for being an outstanding person, on and off the football pitch.”
Coady has returned to work alongside Kevin Thelwell, who brought Coady to Molineux.
Speaking to Everton, Coady said: “It’s incredible to join Everton. As soon as I heard the interest, from the manager but also the football club itself, I really wanted to be part of it straight away. I’m over the moon to join.
“I’ve grown up around the city, I know the football club, how big this club is and what it means to the supporters. I’m someone who was desperate to come here, to play for this club. I’ve got family and friends who are massive Evertonians.
“I’m here to give absolutely everything I’ve got for this football club. It’s important I work as hard as I can to help my team-mates, help the club move forward and make people proud.”