With USC coach Lane Kiffin and his family in attendance, Barkley announced Thursday that although he feels prepared for the NFL, he believes has more to accomplish with the Trojans.
His announcement set off cheers at USC's Heritage Hall and music from the school's marching band.
"This 2012 team has some serious unfinished business to attend to and I plan to play a part in it," Barkley said. "I have firmly decided to forgo the 2012 NFL draft and finish that."
Flanked by USC's six Heisman trophies, and with a cardinal-and-gold ornamented Christmas tree behind him, the quarterback thanked the hundreds in attendance, his family and his girlfriend before making the announcement.
Barkley also said he spent "considerable time" talking over the decision with former USC athletes, pro athletes and NFL experts. They all "validated" his belief that he was ready to declare for the draft, Barkley said.
But that wasn't enough to convince him to leave.
The lure of a potential BCS bowl game was too much to pass up for a player who has played his past two seasons with no such opportunity -- the NCAA handed down a two-year bowl ban in 2010 after USC was found guilty of a lack of institutional control.
Barkley repeated over and over Thursday that the on-field pieces lined up perfectly for his return to school.
"I am not postponing my dream of playing in the NFL just so that I can have one more year of college life," he said. "I am staying because I want to finish what I started."
The 6-foot-2, 220-pound junior threw for 3,528 yards, 39 touchdowns and seven interceptions in 2011, leading the Trojans to a 10-2 record and a No. 5 overall finish in The Associated Press Top 25 (USC was not eligible for the BCS standings or USA Today poll because of the NCAA infractions).
He was projected by many draft experts as a top-10 pick in April's draft, with most ranking him behind only Stanford's Andrew Luck as the top quarterbacks in the country.
Barkley, 21, informed Kiffin and the rest of the coaching staff at his Newport Beach home on Wednesday evening about his decision. He presented Kiffin with an ornament that said, "One More Year."
Kiffin said at the conclusion of USC's season last month that the only way Barkley would return to school would be if he decided to be a "special Trojan" and put the university's interests ahead of his own.
That's what he did Thursday, Kiffin said.
"This is a special, special college student-athlete story," Kiffin said. "To be a part of this story is unbelievable for all of us involved."
He had an uneven first season with the Trojans, making some questionable decisions that led to 14 interceptions. Still, Barkley threw for more than 2,700 yards and 15 touchdowns to become the only freshman semifinalist for the Davey O'Brien Award as the nation's best quarterback.
Barkley emerged as a mature leader by his sophomore season, again throwing for more than 2,700 yards, with 26 TDs, a completion rate of 62 percent and 12 interceptions.
He also handled questions about USC's sanctions with poise, never shying away from talking about the program's difficulties.
This season, he developed into one of the country's best, throwing for 3,528 yards and 39 touchdowns with only seven interceptions. The Trojans won seven of their final eight games, though had to endure a second straight bowl-less season.
USC left tackle Matt Kalil declared for the NFL draft last week, but on Wednesday, safety T.J. McDonald said he was returning for his senior year. Now with Barkley, the Trojans are loaded and likely one of the front-runners to win next year's national title.
Barkley also will enter next season as the leading contender for the Heisman Trophy -- much the way Luck did when he made a similar decision after the 2010 season -- and can firm his place as one of the best quarterbacks in the history of a program filled with great ones.
Pedro Moura covers USC football for ESPNLosAngeles.com. Information from The Associated Press was used in this report.