Traore, known for his rapid pace and dribbling ability, becomes Wolves' latest signing in a summer where they've also acquired the likes of Rui Patricio, Leo Bonatini, Ruben Neves, Joao Moutinho and Diogo Jota.
A brief statement on Wolves' official website said: "The 22-year-old completed his medical on Tuesday morning and put pen to paper on a five-year deal at Molineux.
"Traore joins after an impressive season at the Riverside Stadium, where he was voted the club’s Player of the Year as Boro reached the Sky Bet Championship Play-Offs.
"His efforts were reflected with a triple award win at Boro’s End of Season Awards, which has led to Traore’s return to the Premier League with Wolves. Internationally, the winger has represented Spain at four different age groups, including the under-21s earlier this year."
Traore helped Middlesbrough reach the Championship play-offs last season before they were knocked out by Aston Villa, who in turn lost to Fulham in the final.
The 22-year-old registered five goals and ten assists in 36 Championship appearances last season and will look to improve upon his previous Premier League showings with Aston Villa and Boro.
Traore is yet to score a goal in England's top flight in 37 appearances, but will hope to turn that statistic around under Wolves' highly rated boss, Nuno Espirito Santo.