Since arriving on a temporary deal from Benfica, the Mexico worldwide has scored 15 goals in all competitions to help Wolves climb to seventh place in the Premier League table and reach the FA Cup semi finals at Wembley.
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"We've had some good moments, some bad moments; but the best ones have been so good and I'm very happy for that".
The club's sporting director Kevin Thelwell said: "The impact Raúl has made during his short time at the club has been fantastic and we're delighted that he'll be part of the club's long-term future".
Wolves have broken their transfer record four times since wealthy Chinese owners Fosun took over the club nearly three years ago, with Jimenez's transfer fee comfortably surpassing the £18m spent to bring in Adama Traore last summer.
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"Since I've arrived here it's all been so good", Jimenez told the club's website.
"His goals in the Premier League and FA Cup have been vital to this season's success and we're looking forward to seeing him contribute even more during what will be an exciting end to the season in both competitions".
The Mexico global has featured in each of his side's 32 league matches this term, scoring 12 times as Nuno Espirito Santo's men have climbed to seventh in their first season back in the top flight.
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When loan deals are made permanent they are not usually greeted with the wild excitement that accompanies a signing out of the blue. Jimenez has been a revelation not just in terms of his goal output but his overall contribution to the side.