The Republic of Ireland international, who had previously been linked with Aston Villa, joins Mick McCarthy's side on a four-year contract.
The 25-year-old netted 55 league goals in 154 league outings for the Royals after arriving from Cork City in 2005 for less than £100,000.
"I'm delighted to get the move sorted and can't wait to get going," he told Wolves' official website.
"I spoke to the manager and chief executive over a week ago and came to the training ground to see everything.
"I've been making my mind up over the last couple of weeks and am just really pleased the decision has been made.
"The facilities here are top class and it's great to be going back into the Premier League again.
"I'm sad to be leaving Reading because I had some great years there but I'm going with their blessing as well which is nice. This is a fresh start."
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