Reed announced his decision Tuesday on social media.
"I've come to a final decision to return to Michigan State and use my last year of eligibility. We have unfinished business to take care of," Reed wrote in a post on Instagram. "Thank you Spartan Nation for being the best fan base in the nation. A huge contribution to an undefeated season in the Woodshed!!! This was a year that I'll never forget."
The Spartans finished 11-2 overall and 7-2 in the Big Ten and were ranked No. 11 in the final AP poll after a 31-21 victory over No. 13 Pittsburgh in the Peach Bowl on Dec. 30.
Reed finished the season with 59 catches for 1,026 yards and 10 TDs, returned 12 punts for 238 yards and averaged 23.5 yards on 16 kickoff returns. He was second in the conference in all-purpose total yards (1,567) and was one of only four players nationally with two punt return touchdowns.