The new five-year contract will keep the youngster at Ibrox until the summer of 2017.
Wallace has become the fourth Rangers player to sign a new contract with the Scottish outfit this week.
Barrie McKay, Lewis Macleod and Robbie Crawford signed new deals with the club on Tuesday.
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Summer 2016 is set to be a very exciting time for football fans, as this is when the long awaited Euro 2016 tournament kicks off.
Since Guus Hiddink arrived at the helm, Chelsea have improved considerably after a tricky start to the campaign.