Clay, a former ESPN 300 member, was arrested for theft by taking and released on $1,500 bond Wednesday night, according to the Athens-Clarke County jail website.
"Unfortunately, Chad will no longer be a part of our football program," Bulldogs coach Kirby Smart said in a statement. "It is very disappointing, and we wish him the best in his efforts to continue his education."
In April, Clay and fellow Georgia freshman Julian Rochester were arrested on felony charges of possessing a weapon in a school zone and second-degree criminal damage to property. The weapon, a BB gun, was discovered in their dormitory by a university housing official.
Clay, a 6-foot-1, 178-pound cornerback from Peachtree Ridge High School in Duluth, Georgia, was ranked the No. 247 prospect in the ESPN 300. The 19-year-old had enrolled at Georgia early.