The Portuguese guided the club to a sensational 99-point haul last season, securing the Sky Bet Championship title and a return to the Premier League after a six-year absence.
Coaches Rui Pedro Silva, Rui Barbosa, Antonio Dias, Joao Lapa and Julio Figueroa will also extend their stay in the West Midlands, and are joined this season by Ian Cathro who signed a three-year contract.
“I am very thankful because of the trust and the confidence that the club puts in us as a technical team,” Nuno told wolves.co.uk.
“My team really work as a team. First of all we are friends, we respect each other, we admire each other and we work for the same goal.
“That goal is to find every detail we can to help the team to perform well, compete well, and fortunately win.
“We knew that the project required time and now we have three years ahead of us of contract, and we are very, very thankful and delighted to be here.”
Nuno arrived at Molineux in May 2017 and set about turning the vision of the club’s relatively young ownership into a reality.
After a number of key signings over the summer months and a tangible change to the style of play, Nuno’s side hit the ground running in August, collecting maximum points from their first three games.
Over the festive period, a 13 match unbeaten run saw Wolves sitting top of the Sky Bet Championship, where they stayed until the final match of the season.
“When we came (to Wolves) there was a big challenge in front of us,” he continued. “I think the Championship is one of the most challenging competitions in the world.
“So we started with the ambition to have a team that could compete in every game and create an identity that was a shape, a formation, that allowed us to go through all the competition playing the same stye, in the same way.
“We did it, and we achieved what we wanted. We have a team, and we are in the Premier League, and we are now in year two.
“In year two we know the challenge is even more difficult, but we have something that we hold onto - we have our own identity. The players know how we play, they know and understand our game.
“We have to hold onto it, further develop the performance of some players, getting them to a higher level, and at the same time we will increase the quality.
“When you speak about increasing the quality, of course the squad is going to change.
“We need to bring in players and we will do so, but it is very difficult to find the right ones, because the quality that we have already is high.
“There are other things we have to look at: the quality of the player, the ambition of the player, and the will to come to Wolves and help this big club become even bigger, in the best competition that is the Premier League. It is going to be a challenge for everybody.
“The way we did it last year was absolutely amazing - I cannot thank the supporters enough. But at the same time I humbly ask, let’s do it again. Together we are stronger.”
To see Nuno's squad take on FC Basel tonight (Tuesday) at 5pm (BST), live on Wolves TV, please click here.