Hamburg midfielder Walace has been told to train with the under-21s until further notice due to his misconduct towards the club and teammates.
The 22-year-old Brazil international, who joined the Bundesliga club from Gremio during last year's winter transfer window, has been punished for his recent poor discipline at the Volksparkstadion.
Walace last week refused to play in central defence after coach Christian Titz said the player's "strengths there are most effective at the moment."
He was not present to support his teammates during Saturday's 2-1 home defeat to Hertha Berlin as they desperately battle against relegation at the foot of the table.
Hamburg director of sport Bernhard Peters told the club's official website: "Walace failed to fulfil his contractual obligations last week."
Peters continued: "It was a matter of course for the player to act in a team-oriented manner, to follow the new coach's ideas and to play in the position as he sees most fit.
"We do not tolerate that, while his colleagues were fighting for relegation, he was not present at the stadium and did not support the team.
"If he takes some time to reflect [on] his misconduct, he can return to the coach for talks."
