In helping the Wolverines to a 9-3 season and No. 11 ranking in the final AP poll, Terrell had 67 catches for a school-record 1,130 yards and 14 touchdowns.
The school made the announcement Monday.
Terrell, a 6-foot-3, 208-pound junior, was an All-Big Ten Conference selection the past two years, and the first Michigan player to top 1,000 yards receiving twice.
In his final game, Terrell caught four passes for 136 yards and a TD in the Wolverines' 31-28 win over Auburn in the Citrus Bowl on Jan. 1. Last season, Terrell was the MVP of Michigan's Orange Bowl victory over Alabama with 10 catches for 150 yards and three TDs.
On Friday, quarterback Drew Henson said he'll return for his senior year.
Terrell becomes the fourth wide receiver to announce he was passing up a final year of eligibility for the NFL. The others are Auburn's Ronney Daniels, UCLA's Freddie Mitchell and North Carolina State's Koren Robinson.
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