Barnsley have added to their attacking options with the signing of Mike Phenix from AFC Telford.
Former Barcelona goalkeeper Victor Valdes is training with Manchester United as he recovers from a serious knee injury.
Wallace's contract was due to expire at the end of the current campaign but he has signed a new deal with the Clarets until June, 2015.
The 27-year-old, who is closing in on 100 starts for Burnley since signing from Preston North End in 2010, said: "It's what I wanted and 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 sure really sure what would have happened with Eddie (Howe) here, because we didn't really discuss anything.
"But the new manager made it clear that 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."
Burnley manager Sean Dyche added: "We are delighted that Ross has agreed a new, long-term deal with the club.
"He is a valued member of the squad and I am sure he has a big part to play in our future."