The Portugal forward's new contract runs until 2025 with an option for a one-year extension.

"It's no secret that Daniel was keen to look at new options," Wolves sporting director Matt Hobbs said.

"This is an opportunity for him to go back where he was and play European football, and he was great in understanding that for us to allow it, he had to sign a contract."

The winger spent two seasons with Olympiakos between 2018 and 2020 and helped the club to win the Super League title in 2019-20.

Hobbs added: "There's still a possibility Daniel comes back and plays for Wolves again, but it was the right time to let him go and play this season.

"He can either come back after the season or we'll be negotiating next summer with a player with a longer contract."

Podence is the ninth player to be loaned out by Wolves this summer, with a further eight having been sold, to bring in some much-needed funds for new boss Gary O'Neil.

Wolves are 15th in the Premier League after picking up three points from their opening four games.