The gap to Hibs is still a massive 12 points, but John Hughes' men are in the midst of a mini-slump, having taken just one point from their last three matches.
Asked if Hearts can now catch them, Wallace declared: "I think we can.
"You always have to look positively.
"It wouldn't be right if I sat here and said, 'No, we couldn't'. It can be done."
Wallace scored his first goal of the season against Falkirk last week to kick-start Jefferies' first win since his dramatic return to the club last month.
Hearts' next assignment is Sunday's game against Hamilton and Wallace said: "There has been a big impact and hopefully that can be taken into the game at the weekend and we can start climbing the table."
Jefferies is determined to bring a more expansive style of play to Tynecastle and the fact Wallace has already scored from left-back - albeit with a mis-hit cross - sums up the change of emphasis from that under former boss Csaba Laszlo.
"I think it's just maybe trying to get that winning mentality again," said Wallace, who admitted his confidence had dipped at certain points this term.
"I think at different stages this season, it has been low," he said.
"Probably at this moment in time, it's quite high.
"That might be the new management team or it might just be the fact that we won a game there at the weekend.
"I'm sure everyone's confidence will be high going into this match on Sunday."
Wallace will be hoping to catch another former Hearts manager's eye on Sunday, with Craig Levein due to name his Scotland squad for next month's friendly against Czech Republic less than 24 hours later.
"I suppose I've got to target that," said Wallace, who made his international debut in Japan in October.
"Being part of the set-up, you look to stay involved for as long as you can."
Also looking to stake a claim for an international recall is Wallace's Hearts team-mate Laryea Kingston, who looks set to make his first appearance for more than two months.
The midfielder, whose native Ghana play in the World Cup this summer, fell out of favour under Laszlo, although he was also sidelined recently with a hamstring injury.
Kingston's commitment to the Hearts cause has been questioned this season but Jefferies urged the club's fans to forgive and forget if he comes off the bench on Sunday.
"What's done is done and in the past and it's a fresh start for everyone, including Larry," Jefferies told Hearts News Today.
"I've had a chat with him, he's told me his side of the story and says he is committed to Hearts. I will be able to judge very quickly if that is the case."
Meanwhile, Hearts director Sergejus Fedotovas has revealed the current economic climate has forced a change to the timetable for redeveloping the club's Tynecastle ground.
The plan is now to construct a new main stand, with additional commercial development to follow at a later date.
Fedotovas added: "We are working on the business model now, and we hope to announce the shape of this towards the time of the AGM, or thereabouts."
Source: Team Talk