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Nuno left the club at the end of this season and Wolves have been searching for a successor since.
They have opted to appoint Lage, who joins the club following a good spell with Portuguese side Benfica.
The 45-year-old led the club to the Primeira Liga title in his first season in management and has a growing reputation within the game.
“It’s a big opportunity. I’m very happy because I’ve returned to this country, and to be the manager of a big team,” said Lage.
“It’s a team and a club that wants to do history and a chance to compete in the Premier League. So, I’m happy, excited, with a big ambition to do great things for this club.
“I’ll be trying to know everyone, to see what the club has to offer, and my first idea is to try to link everyone together.
“I want to create a good dynamic of group, with my staff, with all the departments of the club. I have tried to link all together to start to build up the new cycle.
“I think it’s a good opportunity to understand what Nuno did in these four years and my ambition is to continue and to improve what he did.”