Michigan won their first eight games and spent most of the season ranked #1, until an upset loss to Purdue on November 6 by a score of 16–14. They capped off their Big Ten championship with a 22–0 shutout of arch rival Ohio State and came into the Rose Bowl ranked #3.
Under first year coach John Robinson, USC was upset in the season opener by Missouri, 46–25, the Trojans' fifth straight regular season loss dating back to the prior season when coach John McKay had announced his end-of-season resignation. They then won the rest of their games, climaxed by a 24–14 win over #2 UCLA to clinch the conference championship, and a subsequent 17–13 victory over Notre Dame.
Undefeated Pittsburgh, led by Heisman Trophy winner Tony Dorsett, was the consensus #1 team in the country going into the bowls and played Georgia in the 1977 Sugar Bowl. USC and Michigan hoped Georgia would upset Pitt to set up the Rose Bowl as a national championship showdown, but Pitt scored a dominant 27–3 win over #4 Georgia to keep its #1 ranking. USC finished as the #2 ranked team in both major polls, and Michigan finished ranked #3.