Both the Detroit Free Press and the Detroit News reported the lifting of the ban in their Thursday editions. The action was taken by the NCAA Division I infraction committee.
Michigan officials conceded guilt regarding former booster Ed Martin on Nov. 7, 2002, and announced several self-imposed penalties. Martin, who told investigators he paid former basketball players about $616,000, died of a heart attack in February.
"We have learned some hard lessons from this experience, but we emerged from it with a stronger program and a renewed commitment to the highest standards of integrity," said Athletic Director Bill Martin.
Michigan will lose four scholarships over a four-year period and serve four years of probation ending in November 2006, but will be eligible for the postseason.
"I am thrilled for the young men on our team and I truly believe they deserve this opportunity," said Coach Tommy Amaker.