Allar was a projected first-round pick in the 2025 NFL Draft but will return to a team that finished fifth in the nation this season. Penn State will take on SMU in the first round of the College Football Playoffs this year, with the winner set to face Boise State.
Allar is 21-5 as the Nittany Lions' starting quarterback and is eager for his senior season return.
"This season has been the most fun I've ever had in my entire life playing football and I'm so proud of what we've accomplished as a team," Allar said in a social media post Monday.
"I know there's still more work to do which is why I look forward to making more memories with my teammates this year and beyond."
Allar threw for 2,894 yards, 21 touchdowns, and seven interceptions this year with a stellar 69.1 completion percentage. His 81.7 quarterback rating was ranked 10th in the nation this past season.
He also had 72 rushes for 279 yards and six touchdowns, all collegiate career highs.
The Ohio native made the announcement shortly after backup quarterback Beau Pribula announced he would be entering the transfer portal.