De Bruyne moves to the Volkswagen Arena on a deal until 2019 following a two-year spell at Chelsea in which he failed to break into the first tream.
The Belgium international, signed by Chelsea in January 2012, was immediately loaned back to Genk upon his arrival at Stamford Bridge.
The 22-year-old spent last season on loan at Werder Bremen, scoring 10 goals in 34 appearances during his time at the Weserstadion.
However, De Bruyne has played just nine times for Chelsea under Jose Mourinho this season, and will hope to secure a regular place in Wolfsburg's starting XI ahead of the FIFA World Cup in June.
After his move was confirmed on Saturday, De Bruyne told Wolfsburg's official website: "For me it was clear from the outset that Wolfsburg is my first port of call when Chelsea gave me the release.
"Therefore I am very pleased that my change has come about. (Sporting director) Klaus Allofs and (head coach) Dieter Hecking have built a very good team with great development potential."
Allofs added: "We are delighted that Kevin will come to us.
"Kevin is convinced of the sporting perspective of VfL Wolfsburg and he has the potential to play a major role."
The sentiments of Wolfsburg's sporting director were echoed by Hecking, who said: "Kevin is a player with outstanding ability. I am very happy that he has chosen the VfL."
De Bruyne could make his debut for Wolfsburg in a home game against Hannover next Saturday.
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