Jimenez has been Wolves’ main source of goals since joining initially on loan from Portuguese side Benfica in the summer of 2018.
An impressive first season at the Molineux stadium led to his loan move being made permanent at the start of the 2019/2020 season.
Jimenez has so far scored 46 goals in 103 appearances for Nuno Esperito Santo’s men in all competitions, leading to links with the likes of Manchester United, Juventus and Real Madrid.
The 29-year-old Mexico international has started the current campaign with two goals in three Premier League games.
"I am delighted to be here and to be at this great club. Since I was a little boy, I just wanted to play, I wanted to enjoy it, live it, and that's why I am here for," he told the club's website.
"They give me all the confidence and the opportunity to be an important guy at the front, and that's what I was looking for when I arrived into Europe, and I'm very happy to continue at this club.
"It didn't take much persuading! It was easy for me to say yes because since the beginning, this is what I was looking for.
"The last two seasons we have given very good performances, so I knew this club has something special and I'm part of a big family here.
"I think Wolves are getting the best out of me, and I'm giving Wolves my best football, but they are giving the best to me too."
Wolves entertain Fulham in their next league game on Sunday.
