Vitinha, 20, made his debut for Porto last season as the Portuguese giants won the Primeira Liga and the Portuguese Cup.
The move comes just days after the Premier League club smashed their transfer record to sign teenager Fabio Silva, for 40 million euros ($47 million), also from Porto.
Wolves executive chairman Jeff Shi told the club's official website: "Vitinha is a crucial signing and an integral component in our recruitment plan for this summer.
"He is an exciting and special young talent, with an abundance of technique and creativity, who can provide a fresh option this season.
"Vitinha's signing demonstrates our ambition and strategy to further evolve our first team and continue to progress on the pitch."
Wolves, who finished seventh in the Premier League last season, open their 2020/21 campaign away at Sheffield United on Monday.
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