Smith, 26, was acquired by the Suns last August in a trade with Milwaukee that also brought center Slava Kravtsov to the desert and sent veteran Caron Butler to the Bucks.
In 70 games as a reserve guard, Smith averaged 3.7 points and 2.6 assists in 14.4 minutes of playing time.
"We thank Ish Smith for his contributions to the Suns," President of Basketball Operations Lon Babby said in a statement. "He played with an infectious joy. We wish him well."
Smith was expendable following the Suns' acquisition of point guard Isaiah Thomas last week.
In 191 career NBA games with Houston, Memphis, Golden State, Orlando, Milwaukee and Phoenix, Smith has averaged 2.9 points and 2.0 assists per contest.