Green made the announcement Thursday at his alma mater. He signed an $82 million contract after helping the Warriors win the NBA championship in June.
"I just felt it was important to me to give back to the university, [to] help the university in any way I possibly can," Green told ESPN's TrueHoop TV podcast. "This is something that I'm ecstatic about."
Over his first three NBA seasons, Green made less than $2.7 million before signing his current deal.
Green referenced Michigan State coach Tom Izzo, set to start his 21st season, as a powerful reason for the donation. He told ESPN, "I went to school a lost boy and I left there a well-guided young man. I owe a lot of that to Coach Izzo and his staff."
The donation, Green said, is for both athletics and academics. A portion of the funds will go toward building a new strength and conditioning room in the Breslin Center, a locker room, a recruiting lounge and a hall of history.
"They're putting a big statue of me on top of the Breslin Center," Green joked, adding, "The weight room will actually be named after me."
The academic aspect of the donation will fund a scholastic program for inner-city kids in Green's hometown of Saginaw, Michigan.
Reflecting on the journey he's made from Saginaw to NBA champion and multimillionaire, Green said, "Obviously you have these dreams and these goals and they just seem that they're so far-fetched that you'll never reach them."
As evidence of how far he's come, Green said, "I never thought I'd be in this position to give anybody $3 million, I've never been so excited in my life to give money away."
Former Spartans players Magic Johnson and Steve Smith have made donations of $3.01 million and $3.05 million, respectively, in the past.