Neto joins the west London side for a fee of £54 million and has signed a seven-year deal with the Blues until 2031.
Chelsea will pay an initial £51.3m for Neto, with a further £2.6m in add-ons.
"I feel really grateful to have joined this club," Neto told Chelsea's official website.
"I have worked really hard in my career to be here and I'm looking forward to getting on the pitch with this shirt."
Neto's arrival takes Chelsea's summer transfer window spending to around £185 million, while the deal surpasses Wolves' previous record sale of £47m that they received from Saudi Arabia's Al-Hilal in 2023 for Ruben Neves.
Neto made 135 appearances in total for Wolves after joining them in August 2019, and last season contributed 11 goals in 20 Premier League appearances after an injury-hit campaign.
He has made 10 international appearances for Portugal, including during the European Championship this past summer.
