It is a first call-up for Jarvis, who scored the winner for Wolves at Aston Villa on Saturday.
John Terry was cleared to join the squad and resume the captaincy despite an injury scare during Chelsea's win at Stamford Bridge.
Main man Matt: Wolves Matt Jarvis has been handed his first England call-up
England squad v WalesFoster, Green, Hart;
Baines, Cahill, Ashley Cole, Dawson, Jagielka, Glen Johnson, Lescott, Terry, Kyle Walker;
Barry, Downing, Jarvis, Lampard, Lennon, Milner, Parker, Wilshere, Ashley Young;
Bent, Carroll, Crouch, Wayne Rooney.
With England manager Capello looking on from the stands, Terry jarred his right knee in a collision with YayaToure and needed lengthy treatment before limping on to the finish.
Jarvis, 24, gets the nod in a 26-man squad ahead of Adam Johnson, who returned after an ankle injury as a late substitute in Manchester City's 2-0 defeat at Chelsea on Sunday.
Released by Millwall as a teenager, the Middlesbrough-born wide-man made the grade at Gillingham, making over 100 appearances for the Kent outfit before he was snapped up by Wolves in 2007.
Jarvis is the first Wolves player to be included in a full England squad since Steve Bull in 1990.
Andy Carroll is also selected for thefirst time for a competitive international having made his England debut against France in November.
Tottenham winger Aaron Lennon is included for the first time since England's last competitive match against Montenegro in October.
Everton defender Phil Jagielka is back, along with Peter Crouch, ahead of England's Euro 2012 qualifier against Wales at the Millennium Stadium on Saturday.
Carlo Ancelotti confirmed Terry is fit to report for international duty, but it made for an anxious few minutes for the England manager. Having handed the captaincy back to Terry, what would happen if he suddenly lost him to injury?
Hey you, over there: Fabio Capello will hope his squad produce the goods against Wales and lift the pressure on him
Split opinion: John Terry will captain England against Wales on Saturday, more than a year after being stripped of the arm-band
'John Terry will play for England,' said Ancelotti, as he reacted to Capello's confirmation that Terry wouldreplace Ferdinand as the permanent England captain, as first revealed by Sportsmail's Martin Samuel.
The Chelsea manager added: 'I think John is happy with this and so I am very happy. A man is a leader not because he has the armband on. He's a leader because he's a professional and he's at the top, like John Terry is.'
Rio Ferdinand is understood to be hurt by the way the captaincy was taken away from him and he and Capelloagain failed to meet on Saturday, despite both attending United's match at home to Bolton.
Capello's squad will meet at their Hertfordshire base today. Ferdinand and Steven Gerrard are injured and unavailable for Saturday and the friendly against Ghana the following Tuesday. Theo Walcott is also missing and one of the key decisions for the England manager will be to select a defensive partner for Terry.
Joleon Lescott played well in a very cautious Manchester City team at Chelsea yesterday, a game watched by Capello, but Everton manager David Moyes urged Jagielka to show more faith in his own ability to overhaul Terry and Ferdinand and command a regular place in England's back four.
Prior to Jagielka being named in the England squad last night, Moyes said: 'He should be looking to establishhimself with England. He needs to drive himself on to be that person.
'That's the bit I want to see come from him. If he does that, he'll help Everton, too. That's really important. Sometimes he suffers from self-doubt but he is a real good game player, one of the better centre-halves about at the moment.'
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Explore more:People: Gary Speed, Matt Jarvis, Craig Bellamy, John Terry, Glen Johnson, Fabio Capello, Ashley Young, Ashley Cole, Wayne Rooney, Rio Ferdinand, Frank Lampard, Gareth Bale, Steven Gerrard, Wayne Bridge, Andy Carroll, Theo Walcott, Aaron Lennon, Adam Johnson Places: Liverpool, Montenegro, Bulgaria, Denmark, United Kingdom, Wales, France, Ghana