"I'm delighted to be joining Wolves," McCarthy told the club's official website.
"There's a big job to do at Molineux and I'm relishing the challenge.
"I can't wait to get to work. With two weeks to go to the new season there is lots to do and it'll be a busy time."
The former Republic of Ireland manager, who is currently holidaying in Portugal, has signed a 12-month rolling contract with Wolves and will be unveiled at a press conference at the Molineux on Monday.