Peters entered the NCAA transfer portal in May. As the redshirt junior passer graduated in the spring, he'll have two years of eligibility remaining with the Fighting Illini.
The Indiana native started three games in 2017 but saw action in only two contests last season, completing one of two passes.
Peters should get a chance to compete for the starting quarterback spot at Illinois. The squad lacks stability at the position after M.J. Rivers announced his decision to transfer this spring.