The 23-year-old Mali international signed for Wanderers on a permanent basis in January 2014 and has since scored 28 goals for the club.
Dicko, who will wear the number nine shirt next season, told Wolves’ official website: “I’m really happy to have this contract extension. I feel good at Wolves and I’m really happy here so I’m delighted that I’ll be staying.
“My team-mates, the head coach and everybody at the club have been really good with me, that helped me to settle and to show what I can do.
“For any players the fans are really important as well. When you go to any stadium it’s always better to play with a good crowd.
“At Wolves the crowd is fantastic, last season it was the best in the Championship so it’s been a joy to play for the fans.”