Wallace was driven from the Aviva Stadium pitch by a medical cart in the 21st minute after twisting his right knee while being tackled by Manu Tuilagi, and will require surgery to fix the problem.
Coach Declan Kidney said after the match: "David took a very bad bang on the knee and while we don't know the exact prognosis, he has unfortunately been ruled out of the World Cup."
Kidney had been expected to name Wallace's replacement on Sunday, but an IRFU statement this evening confirmed Jennings had got the nod.
It read: "Shane Jennings has been called into the Ireland Rugby World Cup squad as a direct replacement for David Wallace who was injured during the game against England this afternoon.
"Wallace suffered a serious knee ligament injury and will require surgery to repair the damage."
The IRFU also announced prop Cian Healy is a major doubt for Ireland's World Cup opener against the United States on September 11 after picking up an eye injury.
"Cian Healy had taken a knock to his eye during the game and following further investigation has shown an injury to his eye socket," the statement continued.
"Medical advice has dictated that Healy's departure date for the tournament has been put back by four days, when he will then fly out to join up with the rest of the squad in New Zealand.
"The injury could rule Healy out of Ireland's first game in the tournament against the USA."
Kidney earlier admitted the withdrawal of Lions openside Wallace was "heartbreaking" for Ireland and the player.
"David took the news like the man he is. There's a word I'm not supposed to say in public, but it happens," he said.
"You have to deal with these things. He's 35 and I've never seen a man as physically fit as he is right now. Never.
"It's heartbreaking for him and his family. It's extremely disappointing for us and will be good news for someone else. That's the cut-throat nature of sport."
A highly attritional match saw Ireland finish with a number of injury concerns, although apart from Wallace and Healy all are expected to be available to face the USA.
Jerry Flannery (shin), Stephen Ferris (hand) and Jamie Heaslip (concussion) left the field early, but Kidney insists none have been ruled out of the World Cup opener.
Kidney eased concerns over Heaslip's condition.
"Jamie had to come off, but has come around fine and is talking away to the lads," he said.
"Hopefully with a bit of a rest he'll be okay."
Tries from Manu Tuilagi and Delon Armitage underpinned England's victory as Ireland slumped to a clean sweep of defeats in their World Cup warm-up games.
Kidney had no regrets over agreeing such a strenuous build-up to the tournament.
"All of the lads have had around two games and they needed those two games," he said.
"If you go to the World Cup you want to compete at the highest level.
"We wanted to challenge ourselves against England and France to know exactly where we are, and we know now.
"We've lost four in the series, which is extremely disappointing. That's not what we aimed for.
"No excuses to camouflage results, we're here to get results. We'll keep working and will get better."
England captain Mike Tindall praised the attacking threat provided by centre partner Tuilagi in a one-sided encounter in Dublin.
Tindall was named man of the match but Tuilagi, making only his second Test appearance, also caught the eye with a dynamic display topped by his fifth-minute try.
The pair look set to start England's World Cup opener against Argentina on September 10 and Tindall admitted the 20-year-old is a dream to play alongside.
"It's great playing next to him. If you're in any doubt just give him the ball!" he said.
"He's a physical specimen who can create anything from nothing.
"When you're as big as he is, with the acceleration that he has...that's what did it for him in that first try.
"He has a powerful hand-off and that little kick off as well, which makes him tough to tackle."
England have won two out of their three warm-up games and Tindall was delighted that the squad will depart for New Zealand with a morale-boosting victory.
"Winning this game was massive. We were comfortable throughout the game and there were some good individual performances as well," he said.
"Having lost to them in the Six Nations but doing what they did to us to a certain extent, it was great.
"We'll be buzzing now and hopefully that buzz will grow and we'll hit the ground running in the World Cup."
Martin Johnson delivered an encouraging fitness update, claiming he expected all 30 of the squad selected for the World Cup to depart for New Zealand on Monday afternoon.
The absence of Nick Easter and Tom Wood (both calf) today were both precautionary, while Mark Cueto (back spasm) should be ready to face Argentina.
Hendre Fourie, a late replacement for Easter who has not been included in the World Cup squad, left the pitch with a hamstring injury but Johnson insisted it is not serious.
"I thought Hendre was outstanding while he was on the pitch," said Tindall.
Gilbert has released a new line of rugby cleats. The Gilbert Virtuo 8S is part of the exciting new product. Check it out.
The entire All Blacks apparel line has been updated for 2013/14. Check out the New Zealand All Blacks polo.
The Nike Tiempo is a solid rugby cleat and one of few styles still made from full-grain natural leather.
The Gilbert Blitz 8S rugby cleat is a great cleat at a great price of $69.99. Get a new pair of cleats today.
A cool looking all black rugby cleat with the high performance adidas is known for. Get in the Gear!
Wear the crest of the British and Irish Lions on your t-shirt. A great look for the summer.
The All Blacks Performance t-shirt is black with hints of blue from the training jersey. Very Cool.
The New Zealand All Blacks training jersey for 2013/14. Get in the Gear!
The USA Rugby Pro Alternate rugby jersey is perfect for any fan of the Eagles. Get yours to wear during the summer Test matches.
The NEW All Blacks 2013/14 jersey has arrived at World Rugby Shop. Dare to wear the colors of the All Blacks.