Wolves boss Kenny Jackett admits he is looking forward to working with Mike Williamson again after a fee of £250,000 was agreed with Newcastle United.
Centre-back Williamson, 32, played five games on loan for Wolves between October and November and boss Jackett has made no secret of his desire to sign him permanently.
Left-back Scott Golbourne has been allowed to join Bristol City and Jackett is delighted to bring Williamson back to Molineux.
An undisclosed fee has been agreed ahead of the medical.
"We are losing one defender and bringing another one in which balances things out, and we are looking forward to Mike being back with us," Jackett told the club's official site.
"He made an excellent impact whilst on loan, and brought his considerable experience and leadership to the back four.
"We will be pleased to secure his services and are looking forward to getting him back here and making another positive impact on the team."
Williamson was recalled by Newcastle from his initial loan spell at Molineux in November to cover for injuries but failed to play after suffering a hamstring problem in training.
He has been at St James' Park since joining from Portsmouth in January 2010 and played 170 games, scoring once, but has fallen out of favour under Steve McClaren.