The 27-year-old defender, who graduated from Liverpool's academy, joined Wolves from Huddersfield Town in 2015 and helped the club gain promotion three years later.
"I'm honoured to play for this football club every day, so to sign a new deal is absolutely incredible," said Coady in a statement on the club's website.
"I look at what this club has given me over the years, and it feels like home to me – it has done since the first day I came."
Coady has not missed a Premier League game for Wolves since their return to the top-flight in 2018 and was rewarded with his first England cap last month.
Wolves, who are 16th in the Premier League after losing two of their first three games, face promoted Fulham on Sunday. (Reporting by Arvind Sriram in Bengaluru; Editing by Ana Nicolaci da Costa)