Traore was Middlesbrough's player of the year last season with five goals and 10 assists as the Teessiders reached the Championship play-offs.
The 21-year-old versatile midfielder had been linked with a move to Molineux earlier in the summer, before suggesting he wanted to stay and fight for his place at the Etihad Stadium.
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The Spain Under-21 global moved to Aston Villa in 2015 but struggled with consistency before being left out of the side due to disciplinary issues as the Villains were relegated. He moved to Villa in 2015 but left after the Midlands side's relegation to the Championship the following year. His club Besiktas are keen to sell and although Wolves have looked at the player there is no interest in signing him.
But Wolves have moved a big step closer to landing ex-Barcelona and Villa man Traore.
Other major additions include Sporting Lisbon goalkeeper Rui Patricio, Joao Moutinho and loanees Willy Boly and Diogo Jota who completed their permanent switches this summer. Although the Ukrainian worldwide would have beefed up their arsenal further, they still have a formidable side to ply their trade in the Premier League.