Wallace, 24, won the 400 metre individual medley at Glasgow 2014, memorably shouting out “For freedom” as he touched the wall to seal victory in the Tollcross Pool. He wore a kilt on the podium for the medal presentation.
The Edinburgh swimmer has now been suspended from all national swimming programmes for three months.
Governing body Scottish Swimming said Wallace’s ban was due to “a violation of the athlete code of conduct”.
Wallace, who pleaded guilty to driving while under the influence of alcohol, issued an apology for his actions.
“It is with much regret that I was found to be driving under the influence of alcohol,” he said.
“Not only have I let myself, my family and team-mates down I have put others at risk and I am profoundly sorry for my actions.
“I recognise that I am in a position of influence and this type of behaviour is not acceptable in any way, shape or form.
“I am now looking to rebuild trust in everyone who has supported me and put their faith in me, and will do whatever it takes to come through this a better, stronger person.
“I am deeply sorry.”
It is not the first time Wallace has run into trouble.
His place in the 2014 Scotland Commonwealth Games was put in doubt after he was arrested in the US for urinating on a police car. Wallace was studying at the University of Florida at the time and was suspended indefinitely from the swimming team.
His parents sold their house in North Berwick to fund his studies in Florida.
Wallace has now signed a letter of intent outlining his commitment to work with the necessary support systems provided and reaffirming his responsibility to British Swimming, Scottish Swimming and the University of Stirling as an athlete.
British Swimming National Performance Director Chris Spice and Scottish Swimming Director of Performance Ally Whike issued a statement, saying: “We can confirm that Dan Wallace has been charged with driving under the influence of alcohol. This is clearly unacceptable behaviour from Dan and we are disappointed by his actions.
“Dan has publicly acknowledged the seriousness of his mistake and is accepting of the consequences that must follow. Together, we will now support him through this difficult period to try to get this young and talented man back on track.”