Terrell Boyd was placed in custody on an arrest warrant Monday evening in Racine, according to Chicago Police.
Boyd, 30, was extradited to Chicago and charged with first-degree murder and aggravated discharge of a firearm in the shooting that took place in the 100-block of North Latrobe.
A Cook County judge ordered Boyd held on no bail Tuesday. Cook County prosecutors said surveillance video captured high quality pictures of Boyd, as well as the other suspects, firing at a parkway full of children.
Wallace was playing on a sidewalk when police said three armed men got out of a white car and fired more than 20 times in the direction of the people holding the party that police said included many children.
It's not clear if Boyd fired the fatal shot, prosecutors said.
Davion Mitchel, 22, was charged in connection with the shooting earlier this month.
Mitchel's lawyers describe him as a local rapper and religious man.
Reginald Lamar Merrill, 33, was arrested and charged on the night of Wallace' murder. Prosecutors said he was the getaway driver.
A man believed to be the intended target, was also wounded according to prosecutors.
The state alleged it all was in retaliation for a late June gang shooting.
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"They personally chose to get into a car. They personally chose to have firearms on them, and they chose to shoot, and their bullets missed and they killed a 7-year-old kid," said CPD Chief of Detectives Brendan Deenihan.
Chicago police say Merrill drove the white car that took shooters to the party where Natalia was killed.
"To see my daughter on the table with a gunshot wound to the forehead that will change somebody's life," said her father Nathan Wallace.
The Wallace family said Natalia loved drawing and coloring, saying something in Chicago has to give.
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Police said using video from the neighborhood they followed the white vehicle through the district, identified a license plate, and were eventually able to stop the car.
Police said they believe a possible motive was gang retaliation. The investigation is ongoing.
Community activists say the bigger problem of violence in the city won't be solved by police, but from within the community.
"We have to put social workers on the street. We have to reopen up the mental health facilities. We have to put money and invest in programs for young people," said Ja'Mal Green, community activist.
Police say Merrill has invoked his right to remain silent. In the meantime they are imploring others involved to do the right thing and turn themselves in.
Sun-Times Media contributed to this report.