They will each provide specialist support for up to 2 children and young people who have experienced a significant amount of trauma.
Members of the City of Wolverhampton Council's Cabinet (Resources) Panel approved the plans which will see the council use one of its existing assets for one of the homes, and purchase a nearby private property for the second.
Councillor Beverley Momenabadi, Cabinet Member for Children and Young People, said: "Over the last few years we have focused our efforts on working with children and families at the earliest opportunity, and this has led to a welcome reduction in the number of youngsters who need to come into our care.
“We must, however, ensure that we continue to offer suitable, sufficient and sustainable children’s residential provision in the city and, as a responsible corporate parent, we have a duty to provide love and care to children in the city who, for whatever reason, are no longer able to live with their birth parents.
“We are pleased to be able to progress plans for 2 new children's homes which will be able to support up to 4 of our most complex young people at any one time.
“Corporate parenting is about loving these children as we would our own, and if they were our own children we would want to keep them close to us.
“By increasing provision in Wolverhampton, more children and young people will be able to stay closer to home and benefit from their local support networks.
“In addition, having the new homes close together will enable both to have the same manager and improve that consistency in care across the two homes.”
It is expected that the new children's homes will be operational next year subject to capital provision.