Wallace agreed to a multiyear contract on the first day of NFL free agency.
In four years with the Pittsburgh Steelers, Wallace caught 32 touchdown passes. He gives the Dolphins the speedy deep threat they lacked last season, when their wideouts totalled three touchdowns.
"He has a unique skill set which we believe will be a welcome addition to our offence," general manager Jeff Ireland said in a statement.
Miami reached a $35 million, five-year deal with inside linebacker Dannell Ellerbe, who helped the Baltimore Ravens win the Super Bowl last season. The Dolphins re-signed free safety Chris Clemons to a one-year deal.
Wallace upgrades an offence that ranked 27th last year while led by Ryan Tannehill, the first rookie quarterback to start all 16 games for the Dolphins. Wallace, a third-round draft pick in 2009, has averaged 17.2 yards per catch and has at least 60 receptions each of the past three years.
He joins a receiving corps that also includes Brian Hartline and Davone Bess. Miami re-signed Hartline on Friday to a five-year deal for nearly $31 million.
Coming off a fourth consecutive losing season, the Dolphins were well-positioned this off-season, with five of the first 82 draft picks and $30 million in cap space. Owner Stephen Ross said he was willing to spend whatever it takes to build a winner.
Ireland, much-maligned by Miami fans for his moves in past offseasons, was ready to revamp the roster on the first day of free agency.
Ellerbe, 27, had a career-high 4 1/2 sacks last year for the Ravens. He was a huge presence in the middle of the Baltimore defence, even after middle linebacker Ray Lewis returned from a torn triceps.
With Lewis retiring, the Ravens hoped to sign Ellerbe to a long-term deal. But he proved to be too expensive for the Super Bowl champions, who faced tough salary-cap decisions.
Clemons started all 16 games at free safety for the Dolphins last year and set career marks in tackles and interceptions.