The forward will head to Molineux on loan until December 31.
The striker has failed to make any real impact since joining the Black Cats and has already had loan spells at Hull City and Middlesbrough during his time at the Stadium of Light.
So far this season, Graham has made a solitary appearance for the club in a League Cup tie, coming off the bench in the closing stages of the 2-1 defeat to Stoke City in the third round of the competition.
In total he has made 14 appearances for the Black Cats during his time, and with the loan spells he's had away from the Stadium of Light, the 29-year-old has scored eight goals from 56 appearances combined.
Wolves fans will be hoping Graham can reach the kind of form that made him a success during his time at Swansea City, where he found the net with a degree of regularity in their first season in the Premier League at the Liberty Stadium - scorin a total of 21 goals from 62 appearances during his time in South Wales.
Graham has been linked with a loan move to the Championship for much of the first half of the season having failed to make an impression for Gus Poyet's side. Brentford were one of the clubs strongly linked with interest, as Poyet said 'several' Championship clubs were interested in him.
For Graham, this presents an opportunity to get a good bit of game time under his belt, but he needs to start finding the net frequently. Regular game time will help this, which could be one of the factors that has led to such poor form over the past couple of years.
He told the Wolves website: “I am delighted to have agreed a loan deal to join Wolves and am looking forward to meeting the lads on Monday and starting training.
“Wolves is a good club which has done very well over the last year and this is a good opportunity for me to try and play some regular football and get back to scoring goals.”