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The development at Thompson Avenue will see the creation of 120 new houses - 40 of which will be council homes, representing the first to be built in the city since the 1980s.
In September, Wolverhampton City Council approved the plans by Kier Partnership Homes to redevelop the site and preparatory work started earlier this month.
The overall development will see a mixture of properties across the 7 acre site, ranging from bungalows to 4 bedroom properties.
These properties are part of wider plans to regenerate the city and increase the number of decent and affordable homes in Wolverhampton.
It is anticipated that the first council properties will be available by March 2015 while the overall development is expected to be completed in 2017.
Councillor Peter Bilson, Wolverhampton City Council's Cabinet Member for Economic Regeneration and Prosperity, said: "This is a very exciting and historic milestone in the city.
"I am delighted that work has now started to create the first new council houses in Wolverhampton for 3 decades.
"One of our key priorities is to increase the number of decent and affordable homes available in the city, so this development will certainly help us achieve that."
Chris King, Managing Director for Kier Partnership Homes, said: "Kier are delighted to be constructing the first council homes for Wolverhampton City Council in 30 years which is very exciting for all the stakeholders involved.
We look forward to working with the local community and making the experience as positive as possible".
- released: Tuesday 26 November, 2013