The 25-year-old has made only 14 appearances since Wolves' promotion to the Premier League in the summer of 2009 because of ankle and knee injuries.
But he returned for the end of last term and his form in pre-season has earned him a new two-year deal, keeping him at Molineux until the end of the 2012/13 season.
Wolves boss Mick McCarthy is delighted to have Kightly fit and available again, and he said on the club's website: "Kights has had an unfortunate time with injuries over the last couple of seasons, but we all know the player he is when he is fully fit.
"He arrived during my first season and made a key contribution in the team winning the Championship title and getting into the Premier League.
"He's had some tough times over the last couple of years and has had to work really hard but it's great to see him fit again now.
"It's great news that he's signed a new contract to extend his stay with us, and I know how keen he is to go out and show what he can do again this season."
Kightly joined Wolves from non-league Grays for £25,000 in 2006 and quickly showed himself to be one of the bargains of recent years.
He was expected to make an impression at Premier League level after starring in the Championship, and he is confident that can still be the case.
Kightly also has the carrot of a potential longer-term deal on the table if he can rediscover his top form.
The winger said: "It is nice that the club came to me and asked me to sign another year. Hopefully I can now get back out and prove my fitness and prove myself again as the same player I was two years ago.
"If that happens then there may well be the chance to commit my future to the club further, and I'd be delighted to do that.
"I understand that, after the last couple of years I've had, I wouldn't be offered another long-term contract.
"At the same time, though, I'm not the sort of person who would want to walk away on a free as some other players might do. I think this deal is good for all of us."