Confirming the change in Ireland's midfield, team manager Joey Miles said: "Luke's injury didn't respond as quickly to treatment as our medical team had predicted. However, we're still reasonably optimistic he will be available for the Test next week against Australia."
This is the second time that the proposed Brian O'Driscoll-Luke Fitzgerald centre partnership has failed to take to the pitch for Ireland.
The all-Leinster axis was originally selected for the Barbarians game last week but O'Driscoll withdrew due to the death of a close friend.
The Irish management have no concerns about Wallace stepping up to the plate, despite Saturday's game marking only his ninth appearance for Ireland and his first in the centre.
Used at Test level as an out-half, the Belfast man has lined out against New Zealand before. He scored 20 points - six penalty goals and a conversion - in the Ireland 'A' team's 43-30 defeat to the touring All Blacks at Ravenhill in November 2001.
He is also well used to O'Driscoll's play having starred with him in the Ireland Under-19 team that won the FIRA World Youth Championship back in 1998. The pair have also played together for UCD.
Miles added: "Paddy has a pedigree of playing inside centre with Ulster. We knew there was an outside possibility of this happening so Paddy has trained for most of the week in that position. So we aren't unduly concerned.
"Paddy took a lot out of the Barbarians game and he will bring that into this match."
Asked about the likelihood of Wallace defending against All Blacks powerhouse Ma'a Nonu, who is 20 kilograms heavier than the Ireland number 12, Miles insisted that would not be a problem.
"Anyone who plays at inside centre in international rugby has got to expect that type of challenge. Paddy is more than up to it."