Smith has until midnight Thursday to pick up the option for $5.3 million for next season. As has been expected for months, Smith will let it pass and test the market.
Had Smith elected to opt in, his salary for next season was only partially guaranteed.
He averaged 12.4 points and made a career-high 204 3-pointers, shooting 40 percent on them, with Cleveland during the 2015-16 regular season. He became the Cavs' starting shooting guard mostly because of his improved defense. He has averaged 11.4 points and shot 44 percent on 3-pointers during this postseason.
Cleveland.com first reported Smith elected to test free agency.