"We felt it was an opportunity to give Jonathan this run, he's been playing well so I just decided to go with him this time," said Irish coach Declan Kidney.
"We've been trying to develop our squad. Paddy Wallace got the opportunity in the second half of the Barbarians match after having been out for a few weeks. He sat out the New Zealand match, and then played well against the Maori, so it's really more a case of giving Paddy a go because I feel he deserves it."
Wallace joins skipper Brian O'Driscoll in the midfield at the expense of Gordon D'Arcy in a fifth change to the New Zealand starting XV. Ulster No 8 Chris Henry will win his first cap when he packs down in a new look Irish back row against Australia in Brisbane on Saturday.
Kidney has been forced to change his complete back row unit from the heavy defeat against New Zealand because of the suspension of No 8 Jamie Heaslip, injury to John Muldoon and the fact David Wallace has had to return home to be with his wife for the birth of their third child.
Two uncapped players appear among the replacements, the Munster hooker Damien Varley and Leinster flanker Rhys Ruddock.
Wallabies coach Robbie Deans has made just two injury-enforced changes from last weekend's defeat in Sydney by England to his starting line-up for the Irish Test.
Adam Ashley-Cooper is promoted from the bench to the wing in place of Digby Ioane, who suffered a shoulder injury in the 21-20 second Test defeat, and Luke Burgess returns at half-back for Will Genia, who is out with a broken hand.
Josh Valentine comes onto the bench as back up halfback along with utility back Kurtley Beale
15 Robert Kearney (Leinster)
14 Tommy Bowe (Ospreys)
13 Brian O'Driscoll (Leinster) Captain
12 Paddy Wallace (Ulster)
11 Andrew Trimble (Ulster)
10 Jonathan Sexton (Leinster)
9 Tomas O'Leary (Munster)
1 Cian Healy (Leinster)
2 Sean Cronin (Connacht)
3 Tony Buckley (Munster)
4 Donncha O'Callaghan (Munster)
5 Mick O'Driscoll (Munster)
6 Niall Ronan (Munster)
7 Shane Jennings (Leinster)
8 Chris Henry (Ulster)
16 Damien Varley (Munster)
17 Tom Court (Ulster)
18 Dan Tuohy (Ulster)
19 Rhys Ruddock (Leinster)
20 Eoin Reddan (Leinster)
21 Ronan O'Gara (Munster)
22 Geordan Murphy (Leicester Tigers)