United, beaten at home by Reading earlier this month and in fourth place, were desperate to close the gap on the leading two.
But Wolves were too hot to handle despite losing keeper Carl Ikeme, with Sylvan Ebanks-Blake also finding the net before Matthew Spring hit the target for United late in the game.
The Sheffield side, with just one defeat in seven games, forced an early corner and on-loan midfielder Greg Halford saw his teasing corner kick punched clear by Ikeme, as United looked for an early breakthrough.
But it was Wolves who broke the deadlock in the fifth minute, Iwelumo tucking the ball into the net from an impossible angle before running to celebrate by the corner flag.
Michael Kightly carved out the goal picking out the in-form striker, who craftily drew the exposed Paddy Kenny off his line before coolly slotting the ball over the line from eight yards.
United's reaction was immediate. Billy Sharp broke through but was blocked on the edge of the area by the oncoming Ikeme. Minutes later top scorer James Beattie raced on to a Kyle Naughton pass as the Wolves keeper produced a carbon-copy stop.
Wolves almost had a second after winning a free kick on the left, Kightly's teasing ball into the goalmouth fell nicely for centre-back Richard Stearman who powered his header over the top from six yards.
Halford, causing problems with long throws on the right flank, launched the ball into the goalmouth and Matthew Kilgallon conjured up a striker's volley, his left-foot strike palmed round the post in spectacular fashion.
But it was misery for Ikeme when he was stretchered off four minutes before the break after pulling up sharply before collapsing in his area, as Wayne Hennessey took over in goal.
Beattie had a chance to add to his eight goals after United won a free-kick two yards from the edge of the box, but although the £4million striker's shot packed power it flashed high over the target.
The United fans were screaming for a goal after Brian Howard's corner appeared to cross the line as Hennessey fumbled at the foot of his near post, with referee Graham Laws looking for a reaction from his assistant.
Iwelumo added a second in the 58th minute after United failed to close down Karl Henry, whose cross was met in emphatic style by the big striker who produced a half-volley from ten yards.
Ebanks-Blake hit the third four minutes later, Kightly threading the ball to the striker who finished from eight yards.
Midfielder Spring gave United hope15 minutes from time, his low strike hitting the foot of the post as it flashed over the line.