The defeat left the Yorkshire club 19 points behind fourth-bottom Burnley with a maximum of 18 up for grabs.
United finished in the top half last season on their return to the top flight but have looked relegation favourites after taking two points from their opening 17 games of this campaign.
Willian Jose's first goal for Wolves did the damage in the 59th minute, meaning United now share the unwanted record of being relegated after 32 Premier League games set by Derby County and Huddersfield Town.
United became the first team to finish as high as ninth in the Premier League and go down the next season since Birmingham City finished ninth in 2009-10 and were then relegated.
Only Sunderland in 2005-06 and Derby in 2007-08, with 11 points, have had fewer points on the board after 32 games in a Premier League season than Sheffield United this term.
"It's about results isn't it," interim manager Paul Heckingbottom told Sky Sports. "We have to go out with our head held high. I think we should have certainly got something from the game. It probably typifies our season.
"It's those moments. The little bit of quality that you need to be there to win games. You have to keep the group of players together and look to build and enjoy the challenges of what will be another tough season in the Championship."
The goal that set the visitors on their way to relegation summed up their season. Moments after missing a glorious chance, the Blades were carved open at the back, with Willian Jose, on his 12th Premier League appearance, tapping home.
Heckingbottom's side had chances to get back into the match, but poor finishing once again let them down. United have scored just 17 league goals all season.
Wolves substitute Fabio Silva should have made the result more comfortable late on, but his struggles in front of goal continued as Nuno Espirito Santo's 12th-placed side closed to within four points of the top 10.
"We started together (with Sheffield United) in the Championship," Nuno told Sky Sports. "(Former United manager) Chris Wilder achieved promotion and their first season in the Premier League was amazing with the same players.
"I have big admiration for Sheffield. The character of their group of players is immense. I'm very sad, but I'm sure they'll bounce back."