The three-person panel decided Thursday in Smyly's favor, dealing the Rays their first loss in seven arbitration hearings.
The 26-year-old lefty asked arbitrators Elizabeth Neumeier, Andrew Strongin and Phillip LaPorte for a raise from $2.65 million to $3.75 million during a hearing Wednesday. The Rays argued for $3.2 million.
Smyly was 5-2 with a 3.11 ERA in 12 starts last year. He started the season on the disabled list because of left shoulder tendinitis, made three starts and then went back on the DL until mid-August because of a torn labrum in the shoulder.
Hearings are scheduled through Feb. 19.
Teams were 8-6 last year, the most hearings since 2001. Clubs are 301-222 since arbitration began in 1974.