Jackson was suspended all of last season because of his arrest.
He was projected as a starter this season before tearing his ACL earlier this month.
“It's been a tough couple of years for Zay with his injury this season and the circumstances causing him to miss last season," said Murray State coach Steve Prohm. "I understand his decision and wish him the best in his academic and basketball future."
Jackson would've been a redshirt sophomore this season.
“I want to thank Coach Prohm for giving me an opportunity to play basketball at Murray State, and for his support during my time as a Racer," Jackson said. "With my injury causing me to miss a second season now, I just believe a fresh start would be good for me."