IL (6-4, 4-3 Big Ten) trailed 28-3 in the second quarter and 31-10 entering the fourth.
Peters threw for 369 yards and three touchdowns.
At the end of the third quarter, Michigan State's win probability was a whopping 99.6%.More news: Nintendo publish wobbly co-op rescue game The Stretchers, out now for Switch
The thrilling comeback win clinches bowl eligibility for the Fighting Illini under Smith, and represents the best stretch of Smith's collegiate career to this point.
Can the Spartans take care of a suddenly red-hot IL team which has a win over Wisconsin this season or will the Illini pull off the road victory and drop Michigan State to 4-5 on the year? But Peters' pass to the end zone was intercepted by Shakur Brown.
IL converted a fourth-and-17 with 1:55 remaining in the game on a 37-yard deep shot to Josh Imatorbhebhe.More news: Saudi Aramco Stock Offering to Launch November 17
The Illini defense, which was the sixth-worst in the Big Ten in opponents points per game coming into Saturday night, held the Spartans to six second-half points and scored a touchdown on an exciting 76-yard interception return.
The Spartans forced IL into a fourth-down situation from the 4, and Peters' pass to Caleb Reams fell incomplete. They've now forced 26 turnovers on the season, and that helped them get back in this one. A loss to the Sun Devils seemed to be the start of the letdown season.
They get an bye week before traveling to No. 18 Iowa on November 23.More news: House Republicans Request Hunter Biden Testify in Public Impeachment Hearing
This isn't the season everyone expected from Michigan State.
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