An MRI on Thursday confirmed the injury, and it's unclear when Wallace will undergo surgery.
The Oklahoman first reported the diagnosis on Friday.
An OSU athletic department spokesman declined to confirm Wallace's injury because of team policy.
Wallace, a junior from Fort Worth, Texas, led the Cowboys with 53 catches for 903 yards with eight touchdowns this season. He has more than twice as many catches and nearly four times as many receiving yards as any other OSU player in eight games this season.
Last season, Wallace led FBS with 63 receptions of 10 yards or longer and tied for second with 25 catches of 20 yards or more. He was second in the FBS with 1,491 receiving yards and third with 114.7 yards per game.
It isn't known how the season-ending injury might affect Wallace's decision on whether to enter the 2020 NFL draft. ESPN's Mel Kiper Jr. didn't rank Wallace among the top 10 receivers available for the draft, and ESPN's Todd McShay didn't include him in the first round of his latest 2020 mock draft, which included five other receivers among the top 32 picks.
The Cowboys (5-3, 2-3 Big 12) host TCU (4-3, 2-2 Big 12) at Boone Pickens Stadium on Saturday (3:30 p.m. ET, ESPN).