The school says it was informed by the NCAA of the decision Wednesday.
Sims played in eight games as a redshirt freshman at Alabama in 2011, then transferred to Virginia in May. When he left Alabama, Sims issued a statement saying he needed to be closer to home to support his family.
He was among the highest rated quarterbacks in the country coming out of Oscar Smith High School in Chesapeake in 2010. He had a 48-4 record and set state records with 10,725 yards passing and 119 touchdown passes.
Coach Mike London says he is pleased to have the matter resolved. Sims is expected to be able to compete for the starting job against incumbent Michael Rocco and sophomore dual-threat David Watford.
Sims has three years of eligibility remaining.
Information from The Associated Press was used in this report.