Hoddle's appointment is a major coup for Wolves, who interviewed a number of high-profile candidates for the job since Jones was dismissed at the start of last month.
"The club is delighted to appoint a manager of the calibre of Glenn Hoddle," said Wolves chairman Rick Hayward. "He has managed at the highest level with England and, most importantly to us, he has experience of taking a club into the Premiership."
Hoddle is likely to watch Wolves' match with Millwall tonight from the stands before taking charge of the team at Watford on Saturday.
Meanwhile, Millwall's Kevin Muscat will receive no further punishment for his tunnel bust-up with Sheffield United goalkeeper Paddy Kenny. Millwall fined Muscat one week's wages and he has been banned for three matches by the Football Association.
The pair were sent off after clashing at half-time during Millwall's 2-1 home defeat on Saturday but Sheffield United manager Neil Warnock claimed Muscat was the guilty party and deserved a harsher punishment.
He alleged the defender butted Kenny and that the goalkeeper was defending himself.
Warnock said a documentarymaker caught the bust-up on camera and that he would send the video to officials at the FA.
But nothing was received within the FA's disciplinary timescale yesterday and they have acted on referee Iain Williamson's report.
That means any video evidence submitted now should not affect Muscat's punishment, which will involve him missing tonight's game at Wolves and the clashes against Brighton and Leeds.
It also means it is unlikely there will be any probe into Warnock's other allegation relating to Saturday's game, that Danny Dichio threw punches in the bust-up.
The Millwall striker missed the game with a calf injury but was at The Den. A club spokesman said: "The referee's report indicates Muscat and Kenny were dismissed for an exchange of punches outside the changing-rooms."
Dichio is in the squad for tonight's game but Jo Tessem will be missing and is thought to have returned to Southampton.