The 29-year-old spent seven years at Molineux before being sold to Fulham in a surprise £2m transfer in 2015, but returned to the club last summer on a season-long loan.
"If ever I was going to leave Fulham permanently, Wolves would be my number one choice, definitely," said Stearman, who hit a milestone of 250 Wolves appearances earlier this week. "I jumped at the opportunity to come back here - to put on the gold shirt again was a massive pull for me. If that could happen again, that would be perfect for me.
"I think I've grown and matured throughout my time at this club, as a player and as a man. Maybe at the back end of my first spell here, I'd become a role model and leader within the dressing room, whether it be out on the pitch or outside of the club and it's something that I love doing.
"I hope everyone can see that I play with my heart on my sleeve - I will give everything I can every time I cross the white line. The performances might not always be there but I'll give everything for the badge and long may that continue."
Stearman - a product of the Leicester City academy - made 29 Championship appearances for the Cottagers last term.