The 47-year-old has been in charge since 2017, guiding Wolves back to the Premier League in his first season at the helm and then enjoying consecutive seventh-placed finishes.
This season has been more of a struggle with injuries and the departures of key players resulting in a bottom-half finish. They are in 12th place ahead of their final game of the season at home to Manchester United.
Nuno's name will now be in the frame for the managerial vacancy at Tottenham Hotspur who sacked manager Jose Mourinho in April.
"Nuno has brought us some incredibly special moments at Wolves that will never be forgotten, but every chapter comes to an end," executive chairman Jeff Shi said in a statement.
"His loyalty and dedication over the last four years has been immeasurable, and we cannot thank him enough for the progress he has made for Wolves."
"Since the first day we arrived at Compton [Wolves' training ground], our ambition was to make a positive change and push this football club forward, and I am proud to say that we did that every single day," Nuno said. "We achieved our goals, we did it with passion and we did it together.
"Firstly, I want to thank the supporters, who have all played such an important part in helping us reach new heights for Wolves, and the people of the city, who embraced us and made us feel at home."
The highlight of Nuno's four years in charge was taking Wolves to the quarterfinals of last season's Europa League.
"Sunday was already going to be a very special day, welcoming our supporters back for the first time in more than a year; but it will also now be a fitting goodbye for someone who will forever remain an important part of Wolves history," Shi said.