Dillon Wallace was born in Craigsville, New York, on June 24, 1863, the son of Dillon Wallace and Ruth Ann Ferguson.

After completing high school and spending the intervening years working in a variety of occupations, he entered New York Law School in 1892. He graduated in 1896, was called to the bar in 1897 and practised law in New York for several years. In 1900 Dillon Wallace met Leonidas Hubbard, an assistant editor with Outing magazine. Hubbard was interested in exploration and adventure and had soon convinced Wallace to join him in an expedition to the interior of Labrador.