Ellison, the team's leading rusher in 2017, also was suspended from the university for 2 1/2 years, the Indiana athletic department announced Friday night.
"Effective today, Oct. 19, 2018, sophomore Morgan Ellison has been suspended for two and one half years from Indiana University," the statement read, "dismissing him from all university-related activities and resulting in his permanent dismissal from the football team."
The move comes two months after Ellison was suspended indefinitely from all team activities. He returned to practice in September for nearly three weeks until the panel's findings were released.
Following a university sexual misconduct hearing earlier this month, Ellison was found responsible for sexually assaulting a fellow student while she was sleeping, the Indianapolis Star reported. The assault continued after the victim awoke, according to the report.
Ellison, who during the hearing denied using force, was allowed to appeal the initial findings. He lost the appeal, leading to Friday's suspension, according to records.
"I am glad justice has been served," the woman told the newspaper. "And it will never undo what was done, but I am at least content that the school made the right decision."
Ellison rushed for 704 yards and six touchdowns last season to lead Indiana in both categories, gaining 186 yards against Georgia Southern and 149 against Rutgers. He also caught nine passes for 60 yards.
Cole Gest, who took over as the starting running back following Ellison's initial suspension, suffered a torn ACL in the season opener and was lost for the year.
The 6-foot-1, 225-pound Ellison was selected all-district, all-conference and All-Ohio in his senior year at Pickerington Central High School after rushing for 1,841 yards and 29 touchdowns. Pickerington Central went 13-2 and made it to the semifinals of the Division I state playoffs.
Ellison was rated the No. 37 running back nationally, No. 4 running back in the Midwest and No. 30 overall prospect in Ohio after missing his sophomore year because of a broken left leg and his junior year with a broken right leg.