Port Wallace was established in 1861 and is named after the Honourable Michael Wallace, a colonial administrator and former President of the Shubenacadie Canal Company. The canal's eventual completion in 1861 resulted in the present-day community being named after Wallace, who died in 1831 at the time of the canal company's bankruptcy. His legacy continues today with an elementary school in the community being named after him.
After Wallace's death, the name of the community was erroneously changed from Port Wallace to Port Wallis, after Admiral Provo Wallis. The new name was officially approved on 3 December 1953, only to be returned to the present Port Wallace on 18 February 1963.