The 20-year-old has signed a five-year contract at Molineux after the Championship club had a reported bid of £15.8 million accepted by the Portuguese side.
A statement from the club read: "Wolves are delighted to announce the arrival of highly-rated Portuguese international midfielder Ruben Neves.
"The 20-year-old defensive midfielder has put pen to paper on a five-year deal after making the switch from Porto.
"Whilst, in line with club policy, the terms of the deal will remain undisclosed, Wolves can confirm it is a club record transfer outlay."
"I'm very excited to play at this club," he told Wolves' official website. "It is a very big club and I hope to help the team to win their goals.
"I have always wanted to play in England and we have a good team. I think we can do good things this season.
"It is also a good opportunity for me to work again with a trainer I worked with last year.
"I am very excited to start and to play in front of the fans – I love that."
Wolves have also confirmed the signing of centre-back Willy Boly, who has joined from Porto on a season-long loan.
The Neves deal is said to have been facilitated by agent Jorge Mendes, who has close ties with Wolves owners Fosun.
The club's previous transfer record was set in January when they paid a reported £13m to Benfica for winger Helder Costa.