Traore, 22, spent the last two seasons at the Riverside Stadium. He scored five goals and provided 10 assists in the previous campaign in the second-tier Championship to be voted Middlesbrough's player of the season.
A product of the Barcelona youth system, Traore left the Spanish club in 2015 for a stint with Aston Villa. He then moved to Middlesbrough after a season.
Traore is Wolves coach Nuno Espirito Santo's fifth recruit of the transfer window and follows goalkeeper Rui Patricio, defender Jonny Castro Otto, midfielder Joao Moutinho and forward Raul Jimenez into the club.
Wolves host Everton in their opening league game on Aug. 11.
(Reporting by Shrivathsa Sridhar in Bengaluru; Editing by Christian Radnedge)
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