Hood and Malloy will perform community service in conjunction with their court cases and must meet certain University and football team criteria, but will be allowed to resume workouts with the football team.
Malloy also will be suspended for the Tar Heels' first two games of the season, at Oklahoma and at Maryland.
Hood and Malloy were arrested on separate charges in February and were suspended by Bunting. Both received deferred prosecution.
"We take all of these matters extremely seriously and we will always take appropriate action," said Bunting. "We have high expectations of our players because they represent the University and the football program. We also understand that people make mistakes and deserve another chance.
"Both players can return to practice with the football team, but they must still meet court-, University- and football-ordered requirements to be complete members of the Carolina program."
Malloy was arrested for assault on a female in Chapel Hill, and Hood was arrested for the crime of larceny by an employee in Durham.
Hood played in 11 games for the Tar Heels last season.
The program also announced Friday that rising senior fullback Anthony Saunders will not return to the football team in 2001 due to degenerative arthritis in his left shoulder to end his playing career.
The 6-2, 225-pound native of Greensboro will receive a medical hardship and will remain on scholarship for the 2001 season.
