Halford has signed a three-year deal - with an option for a further 12 months - at Molineux to follow the captures of Kevin Doyle and Andrew Surman.
The 24-year-old joined Sunderland in 2007 from Reading for £3million but failed to settle on Wearside and was subsequently loaned out to Charlton and Sheffield United.
"I'm really excited about moving down to Wolves," Halford told the club's official website after completing the deal.
"It is going to be an exciting season for the club going into the Premier League and hopefully we can push on and establish ourselves in the division.
"Wolves are obviously a big club and the infrastructure is all there.
"There's a great training ground, great stadium and a large fanbase and all the plans are in place for Wolves to really establish themselves."
Halford scored the winner in the play-off semi-final against Preston which took Sheffield United to Wembley but the Blades' loss to Burnley effectively ended any hopes the South Yorkshire side had of luring him to Bramall Lane on a permanent deal.
Wolves immediately stepped in and Halford did not hesitate to link up with manager Mick McCarthy.
"I know there has been interest from Wolves for a while and apparently a call went in not long after the play-off final," he added.
"That went a long way to making up my mind to be honest, how keen the manager was to get the deal done.
"It always plays a big part when a manager shows how much he wants you to join and obviously I'd also heard a lot of good things about him from other people."
"Trying to prove myself at the top level is another main reason for the move.
"I thought I did well in the Championship last season but want to do well in the Premier League as well.
"There probably wasn't going to be that chance for me at Sunderland but I'm delighted to take the opportunity of trying with Wolves."
Halford can play at right-back, in midfield and also in attack and should add some versatility to McCarthy's squad.