Wallace E. Johnson, co-founder of the Holiday Inns hotel chain, with Kemmons Wilson Jr., died of a heart attack Wednesday in Memphis, where he lived. He was 86 years old.

Mr. Johnson had already become a millionaire in construction when he joined forces with Mr. Wilson, a Memphis businessman, in 1953 to start the company that became the largest hotel and gambling casino operator in the world.

In the 1960's the partners went into two other ambitious ventures that did not pan out. They sought to build a chain of convalescent homes for the elderly, Medicenters of America, and they formed the Alodex Corporation to erect single-family homes. Medicenters never really got off the ground and Alodex suffered huge losses and was liquidated in 1976.

But the partners prospered with Holiday Inns, which became a benchmark for hotel chains not only in the United States but overseas. Eventually they turned over active direction of the business to others and Mr. Johnson retired in 1979, becoming vice president emeritus, while Mr. Wilson stayed on until 1979. Picking Cotton at 7

In spite of his accumulated wealth, Mr. Johnson often referred to himself as ''a poor little old peckerwood boy from Mississippi.''

He was born in Edinburg, Miss., the son of a sawmill laborer who earned 50 cents a day. He started picking cotton when he was 7 years old and by the age of 16 he was an itinerant carpenter; two years later he had saved up $1,800 and began building houses on his own.

His first job, in 1919, was for a railroad agent for whom he agreed to build a home for $9,000. But he had not reckoned on the work involved in installing an intricate French mantelpiece, and he wound up $400 in debt.

He went back to high school and when he graduated three years later he was hired by one of his creditors to manage a lumber yard for $100 a month, a handsome salary in that time and place. Success in Construction

He took a correspondence course in architecture but before he could get back into contracting the Depression struck, so he went to Arkansas to work in a building-supply house. When the Federal Housing Administration began financing single-family home construction in the mid-1930's, he jumped into the field and soon became a major builder in the Memphis area.

During and after World War II he built low-cost housing, earning a reputation for constructing small houses quickly and efficiently, selling them with low down payments. He quickly became a millionaire.

Mr. Johnson is survived by his wife, the former Alma McCool, whom he married in 1924.

Wallace E Johnson