Wallace has agreed to terms on a new contract with the team, a person familiar with the negotiations told ESPN NFL Insider Adam Schefter Thursday night.
The career NFL backup was 1-3 after replacing starter Jake Delhomme, who injured his ankle in the season opener. Wallace was then sidelined after a similar ankle injury on Oct. 10.
Wallace recently said he wanted to compete for a starting job, and when the Browns indicated that Colt McCoy will likely be their No. 1 QB next season, it was assumed Wallace would sign elsewhere. But he's familiar with West Coast offense new Cleveland coach Pat Shurmur plans to install, and the Browns wanted him back.
Also, the club has re-signed linebacker D'Qwell Jackson to a new one-year, incentive-laden contract worth $4.5 million, a league source told Schefter.
A Browns spokesman said the team would not be announcing any moves on Thursday night.
Jackson has missed most of the past two seasons with two torn chest muscles that required surgery. Jackson, who led the NFL in tackles in 2008, announced his return to the Browns on Twitter.
"I'm backk!!" he wrote. "It's been a long time browns fans. Thanks to everyone I can assure you I won't let you down!!"
Information from The Associated Press was used in this report.