Wallace smashed a lightning quick 152 not out on home turf to propel the Broughty Ferry boys to a lofty 253 for seven in a tussle curbed to 27 overs-a-side.
The hosts then skittled Arbroath for only 89 to regain third place in the Eastern Premiership table.
Scotland batsman Wallace reflected: “I would say it was probably one of my best knocks for the club.
“It was one of those days when the track was excellent and a decent crowd was there to watch.
“We are doing pretty well this season, however I wouldn’t necessarily argue that we are now the leading side in the area.
“Arbroath went very close to reaching the Scottish Cup final, while we were knocked out much earlier.
“It is always a great occasion when we play them – and a victory makes it all the more enjoyable.”
Arbroath skipper Marc Petrie couldn’t mask his admiration of Wallace’s effort.
He said: “Craig’s innings was destructive and chanceless.
“He basically won the match single handedly after his performance with the bat.
“We were well aware of the damage that Craig can do to any team.
“Unfortunately, it was our turn to be on the receiving end.
“It was always going to be a tough task to chase that total.
“We had to go at ten an over from the start and that proved too tall an order.”
Scott Cameron emerged as the most dangerous Shire bowler as he took four for 21.
Meanwhile, RHC Lions look destined to finish in the top half of the league in their maiden season in the top flight.
Their latest victims were north Edinburgh neighbours Stewart’s Melville at Barnton in the only other fixture to beat the elements.
Captain Joe Kinghorn Gray and player coach Majid Haq were the mainstays of their innings with 32 and 29 respectively.
Needing 155 from 25 overs, Stew-Mel crumbled to 74 all out with only Hayden Sweet and Kris Steel reaching double figures.
Haq returned to the spotlight to claim four scalps at a cost of only 22.
The entire programme in the west was washed out, as was yesterday’s Murgitroyd T20 Finals day at Shawholm.
Forfarshire, Carlton, Stirling County and Kelso will battle for the trophy at a date to be decided.