"Michael's done everything we expected of him and has been a very good player for us," manager Mick McCarthy told the official Wolves website.
"We've been delighted with him and are delighted to have extended the loan.
"We'll then wait and see what Chelsea decide in the window and it will be determined by that.
"If they feel they can leave him out and we can have him for the rest of the season then that's what we'll do because that can happen at any time in January."