Lambert was hired by Wolves' Chinese owners after the Fosun Group axed Walter Zenga just 87 days into his reign.
Lambert, who has a Championship promotion on his CV with Norwich, was hired by Wolves' Chinese owners after the Fosun Group axed Walter Zenga just 87 days into his reign.
The former Aston Villa and Blackburn boss takes charge with Wolves languishing in 19th place in the second tier table, with only two points from their last seven matches.
Their latest setback came at home to Derby, who brought a gloomy end to Rob Edwards' spell as Wolves caretaker manager.
Tom Ince gave Derby a sixth-minute lead before Darren Bent doubled their advantage nine minutes later.
Helder Costa reduced the deficit in the 61st minute before Ince struck from the spot in the 76th minutes, with Dave Edwards setting up a frantic finale in the 83rd minute.
"Paul arrives at Wolves with extensive managing experience at different levels, in recent years in the Premier League and the Championship," Wolves director Jeff Shi told the club's website.
"Ourselves and Paul share the same vision and the same mission, to achieve promotion from the Championship as soon as possible, and then aim for a higher goal in the Premier League.
"That mission never changes, and we are doing everything possible to realise it.
"We strongly believe Paul is the key and long-term leader of Wolves to achieve our goals together with the team."
Elsewhere in the Championship, leaders Newcastle beat Cardiff 2-1 at St James' Park to extend their winning run to seven matches.
Rafael Benitez's side were ahead inside three minutes thanks to Christian Atsu's goal before Yoan Gouffran doubled the lead just before half-time.
Peter Whittingham pulled one back in the 77th minute but Newcastle held on and they remain three points ahead of second placed Brighton, who won 2-0 at Bristol City in the day's late game.
Norwich have now gone five games without a win in all competitions as Leeds snatched a dramatic 3-2 win at Carrow Road.
Robbie Brady's flicked header gave Norwich a first-half lead but Pontus Jansson nodded in his first goal for Leeds.
Chris Wood then put Leeds ahead but substitute Kyle Lafferty looked to have rescued a point for the Canaries, only for Ronaldo Vieira's free-kick to earn a third straight win for the visitors in stoppage-time.
Third placed Huddersfield lost ground on Newcastle as they were held to a 1-1 draw at home to Birmingham.
Warren Joyce endured a torrid start to life at Wigan as Reading won 3-0 at the DW Stadium.
Former Manchester United Under-21 coach Joyce was named as Gary Caldwell's successor in midweek but Garath McCleary's quickfire double put the Royals in charge before Yann Kermorgant's second-half penalty.
Aston Villa remain unbeaten under Steve Bruce after coming from behind to defeat Blackburn 2-1.
Ipswich won 2-1 at Sheffield Wednesday, while Preston beat bottom of the table Rotherham 3-1.
Burton and Barnsley shared a goalless draw at the Pirelli Stadium and Nottingham Forest drew 1-1 with QPR.