Jones was dismissed from USC but can apply for re-admission after this semester, a program source told ESPNLosAngeles.com's Pedro Moura.
USC coach Kevin O'Neill told ESPN.com's Andy Katz on Sunday that Jones is eligible under NCAA standards but not allowed to play at USC the upcoming year because of his academic situation. O'Neill said Jones would return for his final two seasons of eligibility.
Jones has to be academically eligible at USC to ensure his return for 2013-14.
"My concern is for Mo to use this year to get better as a player and to have two great years when he comes back," O'Neill said. "There's no question that we have a plan for him to be successful and graduate and we want to make sure that happens."
Jones, a Michigan native, averaged 13 points and 3.5 assists for USC as a sophomore last season. He was slated to slide into a key sixth-man role this season, with senior Jio Fontan and transfer J.T. Terrell taking over as the starting guards.
"It hurts our guard depth a bit," said O'Neill. "We still have J.T. Terrell, Jio Fontan, Chass Bryan, a walk-on freshman guard, Ari Stewart and Byron Wesley. We have quite a bit of depth at those spots but we're not as good without Mo. But we still have a chance to be a good team."
Jones' departure means all five of the players from O'Neill's first two recruiting classes are no longer with the team, including Jones, forwards Evan Smith and Garrett Jackson, guard Bryce Jones and forward/center Curtis Washington.
USC begins its 2012-2013 season Nov. 9 against Coppin State.
ESPN.com senior writer Andy Katz and ESPNLosAngeles.com's Pedro Moura contributed to this report.