The 24-year-old Spaniard has played 22 times for Wolves this season, scoring once, with the club sitting seventh in the Premier League.
“Wolves have signed Jonny Otto on a permanent transfer after a successful loan spell,” said a statement on the club’s official website.
“The Spaniard has agreed a permanent deal at Molineux until 2023, having spent the first half (of the) season on loan from Atletico Madrid.”
“I’m really happy to continue to be involved with the team,” Jonny said. “I am very happy here. The truth is that it was very easy to decide.”
The left-back, who has three caps for Spain, began his career at Celta Vigo, making more than 200 appearances, and joined Atletico last summer.
He never made an appearance for Atletico, however, immediately heading to Wolves on loan.
Jonny joins Adama Traore as the club’s record buy. Traore moved from Middlesbrough for £18 million in August.
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