Sharpe replaces Dan Vickerman who is among the injured in a rapidly depleted Wallaby World Cup squad.
"He's a class act, Sharpie, good bloke to have in the group," said Australia head coach Robbie Deans.
"He's got a huge amount of respect from his peers. He's a master of the lineout and he does a lot of work not only in game but in preparation."
Joining Sharpe in Australia's starting XV are full back Kurtley Beale, who has recovered from a hamstring strain, and a new-look front row in the form of James Slipper, Tatafu Polota-Nau and Salesi Ma'afu.
Berrick Barnes joins Adam Ashley-Cooper in a new look centre pairing after the latter played at full back against the All Blacks
"Berrick is working his way back to full confidence and playing well," he said. "We just felt for this week he warranted a bit more of a dig. He played half the game last week and in terms of the options that we had, we felt he was best equipped."
Sharpe has spent much of the World Cup watching from the sidelines, but he is determined to finish the campaign with a victory.
"I think just the opportunity to play this weekend against Wales, in a very important game for Australian rugby, is something I'm very excited about," he said.
"This game, whilst in previous years people talk about it being a throw-away game, this is going to be a full-on Test match, which it should be because we're representing our country."
Australia: 15 Kurtley Beale, 14 James O'Connor, 13 Adam Ashley-Cooper, 12 Berrick Barnes, 11 Digby Ioane, 10 Quade Cooper, 9 Will Genia, 8 Ben McCalman, 7 David Pocock, 6 Scott Higginbotham, 5 Nathan Sharpe, 4 James Horwill (capt), 3 Salesi Ma'afu, 2 Tatafu Polota Nau, 1 James Slipper.
Replacements: 16 Saia Faingaa, 17 Ben Alexander, 18 Rob Simmons, 19 Radike Samo, 20 Luke Burgess, 21 Anthony Faingaa, 22 Rob Horne.