Mexico international Jimenez has scored 46 times in 106 appearances for Wolves, including two in three Premier League games this term.
That prolific form had seen Jimenez linked with Manchester United and Juventus as the transfer deadline approaches next week.
The 29-year-old initially joined on loan from Benfica in June 2018, with Wolves exercising the option to sign him on a permanent deal the following year.
"I am delighted to be here and to be at this great club. Since I was a little boy, I just wanted to play, I wanted to enjoy it, live it, and that's why I am here for," Jimenez told Wolves' website.
"They give me all the confidence and the opportunity to be an important guy at the front, and that's what I was looking for when I arrived into Europe, and I'm very happy to continue at this club.
"The last two seasons we have given very good performances, so I knew this club has something special and I'm part of a big family here."
Wolves host the Premier League's bottom team Fulham on Sunday afternoon.
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