The 20-year-old Portugal youth international joined the club from Braga last summer and helped Nuno Esperito Santo’s men finish seventh in the Premier League and reach the quarterfinals of the Europa League.
Neto made 44 appearances across all competitions in his debut campaign at the Molineux Stadium, scoring five goals. He has played in all seven of Wolves’ Premier League games so far this season, scoring once.
"It's been amazing being here. I love being here; the family that we are building, all the club, it's been fantastic for me, so I'm very happy," he told the club's official website.
"This new deal shows I'm working very hard and I was expecting it because I worked for it. I always work to improve my game, so it comes with that. I work hard every day, so I'm very happy about it, but I will continue to work now.
"We say that nothing is given to you, so you have to work hard and what I have done in the last year-and-a-half is work hard every day, continue to improve and learn from my team-mates."
"In my first interview, I said that I want to be the best, so I have to work every day because I have to compete with my team-mates in a healthy way. I have to compete to play, to improve, and day by day I try to learn something," he added.
"It's been very good to be here and learn a lot with the coach, with my team-mates, with everyone, and I will keep improving.
"I think it's the good thing about this team, because we all think the same way, we're like a pack, like we say, so we work all to the same goals, all of us try to improve every day, because the way that we play is to improve. It's the mentality of the team and the mentality of the players that are taking this club to a higher level."
Neto joins club captain Conor Coady and Raul Jimenez in signing new contracts with Wolves recently.
