Moutinho dropped into the free agency pool at the end of June after his contract at the Molineux Stadium expired but has been persuaded stay on.
The 35-year-old joined Wolves from AS Monaco in the summer of 2018 for £5m and has made 176 appearances so far.
Wolves technical director Scott Sellars said: “In Joao’s time at the club, he’s been vital, bringing real experience and quality to the group, so to get him resigned is a massive boost for us all.
“With contracts, it’s about getting to a place where everybody’s happy, the club and the player, and it isn’t always easy, but in the end what matters is the outcome and we’re very happy with it.
“He’s a huge influence in the dressing room, with the younger players, and sets standards that they follow. His and Bruno’s relationship is very important. As a coach, you like players who can solve things on the pitch, and Joao is certainly one of them.”
A seasoned Portuguese international, Moutinho is second on his country’s list of most capped players with 146, behind only Cristiano Ronaldo.
Moutinho was part of the Portugal side that won EURO 2016 in France.
