Dale Merza, 20, is charged with misdemeanour hazing after the alleged attack last October on Andrew Seely, 19, at Central Michigan University.
Mr Seely, who was sleeping at the time of the incident, sought medical treatment for serous facial swelling.
The accused could get 93 days in jail and a $1,000 (Â£800) fine if convicted.
Mr Merza's legal representative told the Detroit Free Press his client, who was charged on Friday in Isabella County District Court, was innocent.
"This case has been blown way out of proportion by the individual's family members, who were not present and don't have any of the facts," lawyer Bruce Leach told the newspaper.
It is an induction ritual meted out typically to new members of the US college men and women's social clubs known as fraternities and sororities, but also to military recruits.
The practice can include physical violence, sexual coercion, forced alcohol consumption, or degrading and dangerous "pranks" such as forcing people to eat vile food mixtures or consume large amounts of water.
It is illegal in most US states, amounting usually to a misdemeanour charge, unless there are serious injuries.
There has been a nationwide crackdown on hazing after high-profile deaths including that of Florida A&M University drumming student Robert Champion.
Why is hazing so common?
Mr Seely was targeted at an off-campus fraternity house, Alpha Chi Rho, which was sanctioned in 2011 for hazing incidents.
His mother, Teresa Seely, wrote about the alleged hazing in a viral Facebook post in March, saying: "He could have been killed."
The accounting student only told his family what had happened months afterwards. He blamed the incident for his decision to leave the college.
The teenager's father, Paul Seely, told CBS News his son could have been killed if the peanut butter had entered his mouth.
The Seely family said their son had made known to other members of the fraternity that he had a severe peanut allergy, for which he carries medication.
The National Fraternity of Alphi Chi Rho condemned the incident, saying it did not condone such behaviour.
"Alpha Chi Rho is appalled and upset by the actions taken by individuals against Andrew Seely," said its statement.
A US student has been charged with smearing peanut butter in the face of an undergraduate who has a potentially deadly allergy.