The 22-year-old Burkina Faso international joins Wolves on a contract to 2030 with an option for another 12 months.
Djiga moved to Red Star 18 months ago after a successful stint in Switzerland with FC Basel.
The defender signed permanently for Red Star last summer ahead of now making the move to Molineux.
Chairman Jeff Shi said: “We’re delighted to welcome Nasser to the club. This signing took hard work from a number of people, and we’re looking forward to seeing Nasser become integrated into the Wolves family.
“It was important that we supported Vitor this window and this signing is a strong investment for the club, with Nasser having great potential, and we’re looking forward to seeing him develop under our coaching staff.”
Sporting director Matt Hobbs said: “Central defence is an area we’ve been looking to strengthen this window and Nasser is a player we believe can strengthen the squad, both in the short and longer term.
“Since Vitor came in that back three has been consistent, but Nasser’s the quick, aggressive centre back we’ve been looking for to help the group and we’re looking forward to seeing him fight for his place.”