City have been relegated twice and promoted twice in the past four campaigns under Steve Bruce and then McLeish but they have given every indication during the current campaign that they can halt that pattern and eight points from the last four games have lifted them to 13th spot.
Larsson said: "Confidence is very high at the moment - and so it should be after four games unbeaten, eight points and some decent performances.
"Probably last weekend against Fulham was the worst performance of the lot during that spell but we still showed good character and strength to get three points out of the game.
"What are the goals? First of all, it's to make sure we stabilise ourselves as a Premiership club. That's what we want to do.
"We don't want to keep jumping up and down between the Championship and the Premiership. The Premiership is where we want to be, so that will be the main target.
"As a player you definitely want to look upwards rather than downwards."
Wolves have slipped into the bottom three after conceding four goals against both Arsenal and Chelsea in their last two games.
Larsson said: "We will go to Molineux looking to leave some teams behind us. We don't want to keep looking over our shoulders.
"Hopefully in January, with a few additions to the squad, we can be hoping to climb the table rather than to look down.
"We know we can get three points at Wolves, for sure, but we also know it's a very tough game. It's going to be a massive game for us and especially for Wolves.
"They probably know they can't afford to lose against us. The pressure is probably on them to get three points on Sunday as they don't want to get left behind."
Birmingham have beaten Sunderland and Fulham and drawn with Manchester City and Liverpool in their last four games.
But Larsson knows the importance of also picking up points from the forthcoming run of fixtures with Wolves, Wigan, West Ham and Blackburn.
He said: "It's important not to do well against the so-called bigger teams and then collapse against the lesser teams.
"It's very important to do well against teams in and around us.
"We know we have a few games now in which we can hopefully pick up a few points, and that would set us up nicely for Christmas."