The Clippers have 17 players under contract now, and will need to trim their roster to 15 before opening night.
The Clippers will retain Wallace, who averaged 9.7 points in 30 games a year ago. The Clippers had signed Wallace on a two-way contract, after the Utah Jazz drafted him with the 60th pick in the 2016 NBA draft.
He spent most of the past two years in the NBA G League, but made a strong impression on the Clippers in 28 minutes a game.
Wallace's contract includes a partial guarantee, sources said.
Wallace was an All Pac-12 player at California.