The draw also kept the Timbers (7-14-7) in the driver's seat in the Cascadia Cup, the annual head-to-head competition between the Sounders, Timbers and Vancouver Whitecaps.
"We clawed ourselves back into the game," Portland general manager and interim coach Gavin Wilkinson said. "We gave the fans something to be excited about."
Freddy Montero scored for the Sounders (13-6-9), who are second in the Western Conference and could have punched their ticket to the postseason with a win over Portland and an Earthquakes win over Chivas USA later Saturday.
Seattle stretched its unbeaten streak to five games coming off a 2-1 win over Chivas last Saturday.
Montero blasted the ball past Portland backup goalkeeper Joseph Bendik in the 56th minute, just seconds after Bendik subbed into the came in place of Donovan Ricketts, who was injured in the 51st after a nasty collision with Seattle's Eddie Johnson in front of the goal.
Ricketts stayed on the ground for almost 4 minutes. He tried to remain in the game but waived for the trainer shortly after the resumption of play.
The Timbers appeared to be deflated until Wallace headed in a perfectly placed corner kick from Jack Jewsbury. Bendik stopped a shot from Osvaldo Alonso in extra time to preserve the draw.
"I think after they scored their goal, their approach changed and they hung back more," Portland's Sal Zizzo said. "That gave us more chances."
Portland is in a tie with Chivas for last place in the West and was coming off a 3-0 loss to Colorado last week.
The Timbers lead the Cascadia Cup with eight points to Seattle's five and Vancouver's two. The original Cascadia Cup was introduced in 2004 when the Timbers, Whitecaps and Sounders were part of the United Soccer Leagues' first division. The roots of the rivalry date to 1975, when all three teams played in the North American Soccer League.
"It's a tremendous rivalry for the league," Wilkinson said.