Said Harbaugh: "He's not going to continue to play football."
A team spokesman said Wallace didn't travel to San Diego for Thursday night's exhibition against the San Diego Chargers. Wallace was listed as No. 4 on the depth chart behind Colin Kaepernick, Colt McCoy and B.J. Daniels.
Harbaugh said it was Wallace's decision not to make the trip: "I don't talk people out of it, especially not on game day."
Wallace, a seven-year veteran who was not in the league last year, played five seasons in Seattle and two in Cleveland. He was signed by San Francisco earlier this month after the New Orleans Saints cut him.