Smith, a six-year veteran, is entering the last year of a contract that will pay him $6.03 million this season.
Though Smith has been mentioned in trade rumors before, a source told AOL FanHouse that the Nuggets' sudden willingness to move the shooter is tied to the team choosing not to renew the contract of vice president of basketball operations Mark Warkentien.
Warkentien has been one of Smith's largest supporters within the organization, the source said, having orchestrated the deal that brought Smith to Denver in 2006 via a trade with the Chicago Bulls.
Smith was runner-up for the 2008-09 Sixth Man Award but regressed last year, averaging 15.4 points per game on 41.4 percent shooting.
Smith has had issues in the past with Nuggets coach George Karl and was seen visibly sulking on the bench as the team was knocked out in the first-round of the NBA playoffs by the Utah Jazz this spring.
His brash behavior was also on display following a Game 4 loss to the Jazz, as Smith called out his teammates on Twitter saying, "You play selfish you lose selfish that's all I'm saying about the game!"
Smith is the latest Denver player to reportedly have a limited future with the team as sources told ESPN The Magazine's Ric Bucher earlier this week that Carmelo Anthony will likely part ways with the franchise.