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Wallace, 20, moved to Prenton Park in January and has made 12 appearances for the League One club, scoring his first goal for Rovers in the 2-0 win at Rochdale on Tuesday night.
"James has done well since I've been here so I'm delighted to be able to keep him," Tranmere boss Ronnie Moore told the club's official website.
"He has formed a strong partnership with John Welsh, gets up and down the pitch and is very comfortable on the ball.
"I'm grateful to (Everton manager) David Moyes for helping us out and I hope we can send James back to Everton as an improved player."
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