The 21-year-old, who came through the club's youth academy, has put pen to paper on a deal that will keep him at Molineux until 2016.
Head coach Kenny Jackett has said that the new contract is a reward for Doherty's good form this season.
"Matt Doherty has made a very good start to the season, generally being defensively sound and has created chances and goals for us going forward," Jackett told the Birmingham Mail.
"I have been pleased that he has built to the good start to his run in the team last season which has resulted in the club stepping in very early this season to negotiate a new contract.
"As the head coach I am very pleased we have concluded this quickly and that both the club and Matt see the future here for a young player who has been very good so far."
Doherty has made 26 appearances for Wolves.