The 46-year-old Portuguese manager joins from Gil Vicente, replacing Rob Edwards, who was dismissed last week.
“We are delighted to welcome Cesar to Wolves,” Executive chairman Nathan Shi told club website.
“Throughout our discussions with him, it became clear very quickly that he possesses many of the qualities we believe are important for the future of this football club.
“We wanted clear identity, strong leadership qualities and a real hunger to succeed. Cesar demonstrated all of those characteristics, but what impressed me most was his mentality, his work ethic and his willingness to embrace the challenge in front of him.
“He is young, energetic and ambitious, but he is also thoughtful, accountable and willing to challenge himself and those around him in pursuit of improvement.
“We believe he will be an excellent fit for the culture and vision we are building at Wolves.”
Peixoto inherits a Wolves side preparing for life in the Championship after finishing bottom of the Premier League last season and suffering relegation for the first time since 2018.
He arrives at Molineux after guiding Gil Vicente to a sixth-place finish in the 2025-26 Primeira Liga, earning widespread praise for his work.
Peixoto enjoyed an accomplished playing career, representing Portugal internationally and winning major honours, including being part of Jose Mourinho’s UEFA Champions League-winning FC Porto squad.