Perry was sentenced to 12 months probation earlier this month after pleading guilty to one charge of resisting a police officer and one charge of assault and battery. He practiced with the team this summer and during the first two weeks of preseason camp, but his permanent status with the program was left up in the air until Friday afternoon.
Michigan athletic director Warde Manuel released a statement outlining Perry's reinstatement.
"We conducted an athletic department and institutional review following the conclusion of the legal process," Manuel said. "Based on that review, we have determined that Grant is reinstated to full participation with the football team."
Perry's guilty plea was part of a deal that eliminated two sexual assault allegations from the list of charges, all of which stem from an incident outside of an East Lansing bar last October. He was accused of grabbing a woman's backside and groin while arguing with her and then running from police officers when they arrived outside the bar.
Michigan suspended Perry for two games immediately after the altercation. He was reinstated for the end of the regular season. When he was officially charged in late December, the school once again suspended Perry, keeping him out of the bowl game and spring practice -- including the team's weeklong trip to Rome.
Head coach Jim Harbaugh allowed Perry to practice with the team during the summer but said his status for the 2017 season would be determined after court proceedings were finished. Perry was sentenced to probation Aug. 4.
Harbaugh said the decision to reinstate Perry was Manuel's call. The athletic director consulted Harbaugh and several others on campus before making a decision.
"It was never a good situation from the very beginning," Harbaugh said. "None of us like it that one of ours was in a situation like that. ...It's good to have some resolution to it. I'm not going to call (the situation in general) a good thing."
The court sentence prohibits Perry from consuming alcohol or drugs in the coming year. Manuel said Perry must abide by the terms of his probation as well as "additional internal requirements" in order to remain part of the football team moving forward.
Perry has 27 catches and two touchdowns during his college career.