NBA front-office sources told ESPN.com's Marc Stein that Smith received a three-year deal worth a guaranteed $16.5 million.
Smith averaged 12.6 points for the Nuggets over the past two seasons and was a restricted free agent after receiving a one-year qualifying offer from Denver worth $3.04 million. The Nuggets would have had seven days to match any offer sheet Smith received but managed to reach their own agreement with the 22-year-old.
Part of Denver's motivation in shedding center Marcus Camby's contract in a much-maligned trade with the Los Angeles Clippers last month was ensuring that it had enough financial wiggle room to retain Smith. The Nuggets carried the league's fourth-highest payroll last season, coming away with a luxury-tax bill of nearly $13.6 million and a second straight first-round exit for the Allen Iverson-Carmelo Anthony-Camby trio.
Smith shot nearly 40 percent from 3-point range last season, which represents the best percentage in team history for players with at least 100 3-pointers.
Information from ESPN.com's Marc Stein and The Associated Press was used in this report.