Connor has been offered the post for the remaining 13 games of this campaign, but only as caretaker, and will face a tough first test when Wolves travel to Newcastle on Saturday.
The Black Country side have struggled in their search for a manager after being turned down by former Rangers boss Walter Smith and twice by Alan Curbishley, so they have appointed Connor while they prolong their search for a permanent replacement.
"Since we made the difficult decision to part company with Mick, we have been through a diligent process of assessing potential candidates," said chairman Steve Morgan on the club’s official website.
"Having spoken to a number of people we have drawn that process to a close and myself and the Board are unanimous that Terry is the right man to lead the Club for the remainder of the season.
"This is a decisive step, which creates certainty, and the players are fully behind it.
"As a club, whether that be staff or supporters, we now all need to unite behind Terry and the players and secure as many points as possible over the next 13 games."
Connor was appointed reserve team manager in 1999 and was McCarthy’s assistant for three-and-a-half years before the former Ireland international was sacked.
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