Teti arrives after Matt Hobbs' departure last week. Matt Jackson, meanwhile, takes the newly created position as director of player recruitment and development.
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Italian Teti worked with Wolves manager Vitor Pereira at Al-Shabab and also has past experience with Sampdoria, Novara and APOEL Nicosia.
Teti told the club's website: “I am truly excited to join the Wolverhampton Wanderers family and to feel the passion of its fans, who embody the soul and spirit of this historic club. It is an honour to be part of something so special.
“I look forward to working with Jeff, Vitor, and the rest of the staff and players, contributing to the development of a passionate, forward-thinking, and proactive football culture.”