Wallace was initially signed by Brian Laws in the summer following relegation and he's gone on to make over 120 appearances for us with 111 of them coming in league games.
He becomes the first player to sign a Turf Moor contract since the appointment of Sean Dyche as manager and Wallace said today on completing the deal: "It's what I wanted and it didn't take long.
"I didn't want to move from the start and I am just happy to get a bit of security. I'm not really sure what would have happened with Eddie Howe here, because we didn't really discuss anything, but the new manager made it clear he wanted me to stay.
"I am enjoying my football and as long as I am playing games I am happy. I want to play at the highest level I possibly can. The manager has come in with the same ambition, so it's a good situation."
Manager Dyche added: "He is a valued member of the squad and I am sure he has a big part to play in our future."
Eight other members of the first team squad are coming out of contract in the summer. They are: Michael Duff, Lee Grant, Brian Jensen, Kevin Long, Dean Marney, Chris McCann, Alex MacDonald, Martin Paterson
Source: Clarets Mad