Under the ambitious plan, which follows the lead of cricket and Australian rules football, the greats of Australian rugby will be honoured from the time of the first national team's selection in 1899.
Committee chairman Paul McLean believes recognising the achievements of Australia finest rugby players is long overdue.
"It is often said that there is no higher honour for a rugby player than to wear the Wallaby jersey," McLean said in an ARU statement.
"While that may be the case, there are some players whose playing ability, sportsmanship, commitment, character and personal contribution to their team and the game deserve to be etched into the folklore of our game.
"The Wallaby Hall of Fame is the appropriate way to recognise these players who have given so much to the game of rugby."
The Hall of Fame follows on from the retrospective capping of every Wallaby from the 1930s to the 1990s which has taken place in the last three years.
The concept will kick off with the induction of five players at the John Eales Medal at the Horden Pavillion on October 14.
A further two players will be inducted each year from 2006.
To be eligible for the Wallaby Hall of Fame, a player must have played at least one Test, been retired from rugby for at least 10 years, demonstrated outstanding ability, sportsmanship, commitment, character and personal contribution to their team and the game in their era.
The committee has decided that the first five inductees should include one pre-World War II player, ensuring the entire 106 years of Australian teams are considered.
The other four inductees will be selected from the 1940s to 1990s.
There is the potential for this honour to be presented posthumously, in which case a member of the player's family will be invited to the John Eales Medal to accept the award.
Each inductee will be presented with a crystal trophy which will be etched with the players face, their name, their years as a Wallaby and the date that they were inducted into the Hall of Fame.