On Wednesday, Smith's longtime representative Derrick Fox told The Associated Press that Smith "is not going to play for the Panthers next year, I know that. I just don't know when that transaction is going to take place."
He said the Panthers have not asked Smith, 34, to restructure his contract, which calls for him to make $7 million under this year's salary cap.
Despite releasing the five-time Pro Bowler, the club will have to pay him $3 million this season as part of the three-year extension he signed in 2012. Smith's contract runs through 2016.
Also, Smith will count $5 million under this year's cap. The team could designate him for a June 1 release, which would allow it to split that money over the next two seasons.
Fox said Smith, a 13-year veteran, would have preferred to finish his career with Carolina, the team that drafted him in the third round in 2001. He said Smith was "disappointed and surprised" when Panthers general manager Dave Gettleman talked about the receiver's future in uncertain terms at the NFL scouting combine last month.
"Where we are disappointed is the fact he signed an extension to stay loyal to the club and complete his career as a Panther," Fox said. "That is why we did the long-term team deal. Now we are at a crossroads where the Panthers don't want him anymore."
Smith is Carolina's all-time leading receiver with 836 catches for 12,197 yards and 67 touchdowns. He is 19th all time in receiving yards and 25th in receptions.
He had 64 receptions for 746 yards and four touchdowns last season, helping the Panthers go 12-4 in the regular season and capture the NFC South title.
Fox said Smith plans to continue his playing career when the Panthers cut ties.
"At 34, they could have kept him and run him in the slot," Fox said. "Steve wants to play in the slot. But he can't play the slot with the current roster, and he hasn't been able to play in the slot with the rosters in the past."
Information from The Associated Press was used in this report.