The Englishman started the day at Golf Club Gut Laerchenhof just two shots off the lead but spent much of it looking up the leaderboard at Olesen, who signed for a record-breaking 61 to open up a three-shot lead before the final group had even teed off.
Wallace turned in 34 but made five birdies in seven holes from the turn to sign for a bogey-free 65 and edge a shot past the Dane at ten under.
It was then a waiting game as home hero Martin Kaymer and Finn Mikko Korhonen got within a shot of the leader but they both finished at nine under alongside Olesen, handing Wallace the third win of his European Tour career.
Olesen’s 61 was the lowest round in BMW International Open history, the joint-lowest round of the season and the lowest round of the campaign so far to par as he piled the pressure on the later starters right from the off.
Wallace was the man who handled it best and he added to last season’s victory at the Open de Portugal at Morgado Golf Resort and his triumph at the Hero Indian Open in March.
“Brilliant to win here in Germany,” he said. “The BMW is such a great event and to play against the likes of Martin Kaymer and the guys at the top there, it’s great.
“I work hard for this. I believe I can do it. I want to go further, I want to keep building on this. Obviously this gives me a lot of confidence to go on and play well and I want to kick on and hopefully do this in the bigger events from now on.
“This is great, this is a step in the right direction. We’ll keep working hard to bigger and better things.”
Korhonen – searching for a second win in three weeks after his victory at the Shot Clock Masters – birdied three of his last four holes to make a late move through the field with a 67, while 2008 champion Kaymer saw his hopes falter with a bogey on the 17th in a 68.
Olesen birdied the second, made an eagle on the par five third and then birdied the ninth to turn in 32 but he truly came to life on the back nine, making seven birdies to come home in 29.
The 28 year old birdied the tenth and 11th and then got on the greens at the par five 13th and 15th in two to make two further gains and move past the overnight leaders.
He then put his tee-shot to ten feet on the par three 16th, his approach to tap-in range on the next and hit a stunning approach to the last for a four-birdie finish.
Wallace birdied the first and third but was still an outsider at the turn before he added further gains from long range on the tenth and 11th.
He had good looks at eagle on the 13th and 15th after hitting the greens in two and a pair of birdies saw him share the lead before a tee-shot to 12 feet on the 16th moved him ahead.
Korhonen sandwiched a bogey on the fourth with birdies on the third and seventh as he turned in 35 before making another gain on the 11th. The 37 year old then made the most of the 15th, put his tee-shot to eight feet on the next and holed a monster on the 17th but came up just short.
Kaymer birdied the two par fives on the front nine and although he gave a shot back on the eighth, he made a 15-footer on the tenth and completed his set of gains on the par fives to get within touching distance.
A thinned second through the back of the driveable 17th ended his chances but he got the biggest cheer of the day with a birdie on the last.
Bjerregaard and Rai both signed for rounds of 68, with Kjeldsen carding a 68 and Hend recording a 70.
Spaniard Nacho Elvira, England’s Andy Sullivan and South African Justin Walters were then six under.