The 27-year-old was at the Amex Stadium to finalise the deal on Friday as the Seagulls boss Oscar Garcia looks to turn the club's fortunes around.
In his six and a half years at Molineux, Ward made over 230 appearances for Wolves, in midfield, as a striker but mainly as a left-back.
The Dubliner will be fondly remembered for his match winning goal at Anfield as Wolves beat Liverpool in December 2010. He also won 20 Republic of Ireland caps during his days with the club.
Manager Kenny Jackett said: "Stephen has moved to Brighton on a long term loan and we wish him all the best and thank him for his considerable service to Wolves.
"We all hope that his new career at Brighton goes very well."