Price, who came through the academy at Molineux, has put pen to paper on a deal until 2016 but Wanderers have the option to extend his stay by a further year.
The 20-year-old has made 21 appearances for Wolves this season and boss Kenny Jackett is thrilled that Price has committed his future to the club.
He told the club's official website: "Jack is a very good footballer and also a very enthusiastic personality who is terrific to have around the place.
"He is the first out on the training pitch every day and has come through from an excellent youth policy here.
"He has been a real bonus for us this season and I am delighted that he has committed his future to Wolves.
"We are looking now for him to go on and really establish himself in the side and be a cornerstone of a successful period in the club's history."