The home team performed their best game of the season, with Hwang Hee-Chan scoring an own goal in the 5th minute and debutant Craig Dawson scoring the second goal in just a few minutes.
Despite a strong start to the second half by Liverpool, Ruben Neves effectively ended the game in the 71st minute with a counter-attack goal.
Liverpool is now 10th on 29 points and 21 points behind Arsenal at the top.
The defeat marks the first time in a decade that Liverpool has lost three consecutive Premier League away games. Meanwhile, Wolves victory lifts them to 15th position on 20 points, two ahead of the bottom three.
The coach, Julen Lopetegui, expressed happiness with the performance but warned that his team still had a long way to go to ensure safety