Henson eluded a rush, rolled right and threw across the field on his back foot, over two defenders and one of his receivers, to a leaping Terrell in the back of the end zone.
"There was no diagram," Henson said. "You don't want to take chances like that often, but I felt like it was the time to take a chance."
Henson, who fumbled twice in the first quarter, was 15-of-27 for 257 yards and a touchdown. He played the entire game after missing the first three games of the season because of a broken foot, and coming off the bench last week to lead Michigan to a come-from-behind victory at Illinois.
The Wolverines (4-1 overall, 2-0 Big Ten) became the first Division I-A program to reach 800 wins.
Michigan needed the go-ahead touchdown after Wisconsin took a 10-6 lead with 12:10 left. On a play-action pass, Brooks Bollinger tossed a 5-yard pass to Chad Kuhns to finish a 13-play, 71-yard drive, which took 5:47.
Wisconsin had a chance to tie it with 2:42 left, but Vitaly Pisetsky missed a 42-yard field goal to the left by less than a foot. Bollinger threw two interceptions in the first quarter, the first of which was in Michigan's end zone.
"We had some real wasted chances," Wisconsin coach Barry Alvarez said. "And I'm real concerned that we shot ourselves in the foot. We're making mistakes and we have a small margin of error. Against teams like this, you can't make the mistakes we made."
Michigan's Marquise Walker caught seven passes for 130 yars, Terrell had five receptions for 96 yards, and Anthony Thomas gained 82 yards on 29 carries.
"The defense really won the game," Terrell said. "It wasn't my touchdown score at the end of the game that won the game."
Wisconsin played with its entire roster for the first time this season. The NCAA suspended a total of 26 players, who served staggered suspensions over the first four games, for receiving unadvertised discounts at a shoe store.
Wisconsin's Michael Bennett ran for 123 yards on 30 carries. Bollinger was 8-of-17 for 98 yards with one touchdown and two first-quarter interceptions. Bollinger scrambled for 57 yards on 12 attempts.
"It's a tough one to swallow," said Bennett, who entered the game as the nation's leading rusher.
Both quarterbacks had trouble taking care of the football, especially in the first quarter. In the first 12:21, Henson fumbled twice and Bollinger threw two interceptions.
The Badgers turned Henson's first fumble into a score. Pisetsky kicked a 49-yard field goal to give Wisconsin a 3-0 lead with 4:26 left in the fist quarter.
Jeff Del Verne tied it with a 33-yard field goal with four seconds left in the half. Henson directed a nine-play, 57-yard drive over 1:09, highlighted by a 33-yard pass to Terrell, to get in position to score.
Del Verne put Michigan ahead 6-3 on another 33-yard field goal midway through the third quarter.
On Michigan's game-winning drive, Henson converted on two third downs with a 21 and 20-yard passes to Terrell.
Michigan coach Lloyd Carr, like a proud father, beamed when he was asked about Henson's performance.
"He got knocked down, he got hit, he turned the ball over," Carr said. "When you can do all of those things and then come back at the end and lead your team to a winning touchdown, that says a lot about you. He's got the right stuff I'll tell you that."
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