The 21-year-old anthropology student, nicknamed "Starshark", survived a tough test of his character in the 400m individual medley final but passed with flying colours as he stormed past rival Thomas Fraser-Holmes in the final 50 metres.
His winning performance - timed at 4.11:20 - was a perfect demonstration of patience, with Wallace waiting for the right moment to pounce on his tiring opponent.
Wallace had feared that his place in the Scotland team would be in jeopardy after he was arrested earlier this year for urinating on a police car while he was in the US. He was suspended from his American swim team for the incident.
As the University of Florida student touch home to claim the medal, the atmosphere in Tollcross brought out the patriot in him.
He said: "I just yelled at the top of my lungs for freedom because being here, the home crowd has really brought out the Braveheart and Scot inside of me and I just soaked up the moment."
Corrie Scott fought hard to win her bronze in the 50m breast-stroke.
The delighted Scott said: "If someone had told me this time last year that I would get a bronze medal, I would have laughed in their face and said no way.
"I can't believe it. I need to watch it back. My swimming is my good bit, my dive and my finish are not so good bits, there is always stuff to work on."
But there was disappointment for another home favourite as Robbie Renwick saw his 200m freestyle title slip from his grasp.
The 26-year-old from Glasgow failed to produce the magic that won him gold in Delhi in 2010 as he trailed home in sixth place.
Michael Jamieson missed out on a chance of another medal in the 100 metres breast-stroke, while Ross Murdoch and Craig Benson swan well to clinch their places in the final.