Wolves have confirmed that "negotiations are ongoing" with O'Hara, who made a big impact when on loan at Molineux during the second half of last season.
Reports that the deal has already been formally completed are described as "premature".
But the player has already intimated he wants to make a full-time move to Wolves, and manager Mick McCarthy is keen to keep him.
O'Hara impressed playing just behind the central striker and scored three goals in his 13 appearances.
He was relegated when on loan to Portsmouth for the 2009-2010 season.
But O'Hara helped Wolves stay in the Barclays Premier League on the final day of the last campaign with his goal against Blackburn.
O'Hara confirmed at the end of the season that "I want to stay at Wolves" as it was a club "which is going forward".
Source: PA
Source: PA