Wallace is a rural village at the intersection of the Western Highway and the railway line, 20 km east of Ballarat. It was possibly named after John Wallace, the proprietor of the Ballark pastoral run (1838) on the Moorabool River, the west branch of which flows through the Wallace area.

Wallace is situated in an area with fertile volcanic soil, outside the former gold mining districts. It attracted small-farmer settlers, many of Irish-Catholic origin. In the early 1870s a Catholic school was opened, continuing until 1877 when it was replaced by a government school. In 1903 Wallace was described in the Australian handbook:

The Victorian municipal directory recorded a mechanics’ institute (1930s) and a masonic hall (1960s). Wallace has continued as an agricultural district, but with a population unable to support the local school (closed c1972). There is a butter factory which also functioned as a cheesery until about 1990. Wallace has a hotel, a public hall, a kindergarten and a recreation reserve.

Wallace’s census populations have been:

Census date Population
1881 232
1921 218
1966 139