The 24-year-old has agreed a five-year contract after enjoying a successful loan spell at Molineux during the second half of last season.
O'Hara scored three goals in 13 games, including one against Blackburn on the final day of the campaign that helped keep Wolves in the Premier League.
Manager Mick McCarthy said: "There was a dip in form at one juncture but he came strong again at the end."
An agreement had already been put in place for O'Hara to make his stay at Molineux permanent should the player and McCarthy wish to make that happen.
The former Portsmouth midfielder joined Wolves on loan in January and has played just behind the main striker in a 4-5-1 formation.
"I am delighted the deal has been done which will see Jamie become a permanent Wolves player," added McCarthy.
"It may have taken a bit of time to finalise all the details but it was always going to happen because we wanted to sign him and he wanted to come.
"He showed some real quality when he was on loan with us last season, and that was having come back from not playing for eight months after a back operation.
"Despite that absence, he made a key contribution over the second half of the campaign, and with a full pre-season behind him he has the potential to get even better next season.
"He is a midfielder who is good on the ball, not afraid to put his foot in and also has an eye for goal.
"On top of that he is also a good character around the place who has a positive influence in the dressing room."
Wolves are also interested in Reading defender Matt Mills and Liverpool left-back Paul Konchesky, who spent the second half of last season on loan to Nottingham Forest.
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