The Portuguese manager joined Molineux last December and steered the club from 19th to 16th, securing top-flight safety.
Although Wolves have lost all four league matches this season, Pereira has been rewarded with a fresh deal.
"I’m very proud to be Wolves head coach. It's an honour for me. This is the club that gave me the chance to come to the Premier League, the best league in the world," he told the club webite.
"The people here embraced me as a member of the family, me and my staff we feel very good in the city, among the supporters. That’s why I really believe that with our work, with our supporters, with the support of the club, the fans and the city together, we will do it.
"We will increase our level, with ambition to make our supporters proud on the pitch. This is the moment that we need to be united. We are a one club city, and this city loves football. It is a passion.
"This is the spirit that we need to create together, to face and to compete with the best teams in this league. "
Wolve take on a tough league encounter against struggling Leeds United on Saturday.