Arnett had requested a release from Tennessee to be closer to his ill father in Saginaw, Mich. He could apply for an NCAA waiver to be eligible to play for the Spartans right away.
Initially, Tennessee coach Derek Dooley had declined to release Arnett to Michigan or Michigan State. The school said that reflected a policy prohibiting transfer releases to opponents on the schedule or on the recruiting trail.
That stance drew criticism until Tuesday, when the school said it would release Arnett unconditionally.
Arnett, who had 24 catches for 242 yards and two touchdowns this season as a true freshman, said he also considered Michigan and Notre Dame. He was one of Tennessee's top recruits last season and was ranked in the ESPNU 150.
Arnett said in December that his father has had two heart attacks and undergone dialysis and a series of surgeries.
Tuesday, Arnett said "(Dooley's) decision to release me unconditionally comes as a sign of a compassionate and empathetic coach. I will never be able to express fully my appreciations and gratitude for his decision."
Joe Schad is a college football reporter for ESPN.