A £600,000 fee has ben agreed between the two clubs with left-back Charlie Mulgrew moving to Wolves as part of the deal.
Naylor has turned down the offer of a new four-year deal at The Molineux in favour of a move north-of-the-border.
Naylor deal agreed
"Lee made it plainly clear he wouldn't sign a new contract," chief executive Jez Moxey told the official Wolves website.
"Faced with that situation the club reluctantly decided to agree to his request (to join Celtic)."