The 27-year-old has agreed a three-year deal at Craven Cottage, with the option of a further 12 months.
McDonald, who has had stints at Dundee, Burnley and Sheffield United, made 126 appearances during a three-year spell at Molineux.
Meanwhile, Fulham have sold Fernando Amorebieta to Spanish La Liga side Sporting Gijon for an undisclosed fee.
The 31-year-old Venezuela international, who had one year remaining on his deal in west London, made 48 appearances for the Whites after joining from Athletic Bilbao in the summer of 2013.
The left-back spent time on loan at Middlesbrough in each of the last two seasons.
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Fulham have signed midfielder Kevin McDonald from Championship rivals Wolves for an undisclosed fee.