Sellars' departure was confirmed earlier today and Hobbs, who has been at Molineux since 2015, has taken on the role to work closely alongside new head coach Julen Lopetegui.
Highly-rated Hobbs was reported to have attracted the interest of Manchester United in recent months. He will now oversee sporting and performance departments.
His remit will cover the support staff of the first-team as well as coaching, medical, analysis and recruitment. He will also take a management role of the academy, women and girls programme.
Executive chairman Jeff Shi admitted Wolves' struggles this season have led to analysis of what has gone wrong and a 'shake up' of the club's structure. Hobbs has a direct link with new boss Lopetegui.
Shi said: “I am delighted to confirm Matt in the role of sporting director; he has all the characteristics to be very successful in the position, and has done an excellent job building and developing the recruitment teams at Wolves, both the academy and first-team.
“Matt has excellent management, team-building and communication skills, and has already found a very good synergy with Julen and his team.
Matt Hobbs has been appointed to the position of sporting director.— Wolves (@Wolves) November 24, 2022
Matt will work closely with chairman Jeff Shi, head coach Julen Lopetegui and his backroom staff, and oversee a number of sporting and performance departments across our men's, women's and academy teams.
“I know he will be a be able to bring departments closer together, set very high standards and give our new coaching team the best possible platform for success.
“The last few months have shown the need for us to take a look at what hasn’t been working, assess and make some smart changes.
“We have had a shake up and this is now a fresh start – the past has gone and we only look forward and upward.”
Hobbs previously had roles as south of England co-ordinator and European scout for under-12s to under-23s, as well as head of emerging talent (under-17s to under-23s) and an overarching head of academy recruitment.
He said on the appointment: "I am honoured to be made sporting director at this incredible football club.
“This is an exciting time for Wolves and, with our world class management team now in place, I am very positive about where we can take the club collectively.
“I have daily conversations with Julen and his team about how we can help the club grow and achieve long-term success, and I am looking forward to helping us make our ambitions a reality.”