Wallace Wilkinson was born on a farm in Casey County, Kentucky, about 5 miles (8.0 km) southwest of the city of Liberty, on December 12, 1941. The son of Hershel and Cleo (Lay) Wilkinson, he had two older brothers and a younger sister. His parents were farmers and also operated a small general store. When Wilkinson was four years old, the family moved to Liberty, and the family opened Wilkinson's Grocery. During his childhood, he delivered newspapers, sold popcorn from a street stand, and co-owned a shoe shine parlor with a boyhood friend. He also accompanied his father to sell produce from the back of a truck. It was during one such trip that he met Martha Carol Stafford, whose parents owned a grocery store about 10 miles (16 km) away. The two dated throughout high school and were married in 1960. They had two children: Wallace Glenn Wilkinson, Jr. (b. 1970) and Andrew Stafford Wilkinson (b. 1972).
Wilkinson was a member of the freshman basketball team at Liberty High School. Using profits from his early business ventures, he purchased a business wardrobe that earned him the title of best dressed member of his senior class. He graduated from high school in 1959, but the poor curriculum there left him without the credits he needed to gain admission to the University of Kentucky's engineering program. He began selling livestock feed in Scottsville, Kentucky, and also worked at a venetian blind factory while taking classes at Campbellsville College to earn the credits he needed. In 1962, he moved to Lexington, Kentucky, and enrolled at the University of Kentucky. While in college, he worked at Kennedy Book Store in Lexington. Later, he and two friends borrowed money to open the Kentucky Paperback Gallery in Lexington; Wilkinson left school later that year to attend to the business full-time. At the time, Kentucky high school students were required to purchase their own textbooks, but there was no marketplace for buying and selling used books; Wilkinson's business catered to this market and was highly successful.