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The factory on Showell Road closed its doors in 2007 and has since been demolished.
The council now hopes to appoint a development partner next year to build a mix of high quality council homes for rent and private homes for sale on the site, as well as on land on Fifth Avenue and Broome Road.
Construction could start by summer 2016, with a view to the council units being completed within 2 years, followed by completion of the market housing.
Councillor Peter Bilson, Deputy Leader and Cabinet Member for City Assets, said: "This is a huge shot in the arm for Low Hill and it will be great to see these derelict plots being put to such good use.
"As part of regeneration plans for Wolverhampton, a target of building 13,400 new homes across the city between 2006 and 2026 has been set.
"This project supports the house building programme and will deliver quality homes for all."
The project will comprise a mixture of 1, 2, 3 and 4 bedroom properties; consisting of flats, houses and bungalows.
The development at Fifth Avenue will also include 2 wheelchair accessible family sized bungalows as well as a specialist supported housing scheme for people with mental health needs, which will be staffed at all times.
The council intends to secure planning permission for the proposed new housing through a Local Development Order (LDO).
Newsletters have already been sent to residents in the area and the LDO will be publicised through site and press notices. It will also be available for viewing at the Civic Centre, reception 24, second floor, and on the council's website.
Assuming the LDO is adopted, the council's development partner will then have to submit full details of the proposed new homes to the council for approval.
The wheelchair bungalows on Fifth Avenue will be subject to a separate planning application, as the way they are being funded and delivered means they need to start on site earlier than the rest of the scheme.
A public consultation event about the project will take place at Showell Court, The Daycentre Room, Othello Road, Low Hill, Wolverhampton, WV10 9NN, on Tuesday, 4 August, between 1pm and 8pm.
- released: Monday 27 July, 2015