The defeat left the Fighting Irish looking at their second 0-3 start in school history.
Freshman quarterback Ryan Mallett, making his first career start for Michigan (1-2), went 7-of-15 for 90 yards and three touchdowns.
Irish quarterback Jimmy Clausen, facing constant pressure, went 11-for-17 for 74 yards and an interception. The Irish offense has yet to score a touchdown this season.
Clausen was sacked eight times, as Notre Dame finished with negative-six yards rushing.