Wolves are confident of pushing through a move thanks to their close relationship with Jorge Mendes, Cancelo's agent.
If successful, the suggested fee will be in the region of £35million (€40m) and will represent a successful coup for the club.
Cancelo spent last season on loan at Inter, making 23 appearances as the Serie A outfit secured Champions League football for the first time since 2012.
It means the full-back has tonnes of experience playing for top clubs in either Spain or Italy, which will be invaluable given Wolves will be hoping to secure their Premier League status next year.
Cancelo has also been capped seven times by Portugal, but unfortunately didn't make it into their 23-man squad for this summer's World Cup.