In 2021, the Premier League outfit brought Sa in as a replacement for Rui Patricio, choosing to spend €8m on the Portuguese.
The former Olympiacos stopper kept a total of 22 clean sheets from his first 73 appearances in England's top flight, but there was speculation regarding his future in the summer.
Sa found himself heavily linked with a transfer to Nottingham Forest, owned by Evangelos Marinakis who is familiar to Sa through also being the owner of his former club.
However, Forest instead opted to sign Matt Turner and Odysseas Vlachodimos from Arsenal and Benfica respectively, ensuring that Sa remained at Molineux.
Although Wolves have endured a difficult start, the 30-year-old conceding 12 goals in six matches, work has been undertaken behind the scene to agree fresh terms.
Sa is now tied to Wolves until the end of the 2026-27 campaign, with an option of a further 12 months, and sporting director Matt Hobbs has acknowledged his delight in retaining his services.
Hobbs told the club's official website: "We're excited that Jose will be part of this next stage and cycle we'll be going through, and he'll play an important role in that, on and off the pitch. He's excited by what we're trying do, but also understands that people like him, in his position, are really important for us.
"It's something that he's earnt. He's been a really important player to us and a leader off the pitch and is improving all the time. It's a reward for his hard work primarily, but also shows his importance to us.
"He can see where the club are going and what we're looking to do over the next few windows, so he was excited by that also. He's a winner, is someone who shoulders responsibility, and wants us to move forward."
Wolves will hope that Sa can keep his 24th shutout in the Premier League when they host leaders and defending champions Manchester City on Saturday afternoon.