The 26-year-old came through the club's academy and has scored 16 tries in 135 appearances for Quins since making his first-team debut in 2009.
"My decision to renew was a quick and easy one," uncapped Englishman Wallace told the club website.
"Harlequins is all I've known during my career and I can't imagine being anywhere else."
Quins have not disclosed the length of Wallace's new deal at The Stoop.
Harlequins flanker Luke Wallace has signed a new contract with the Premiership club.