Smith, 55, had a 66-46 record in his tenure, along with a 1-4 mark in the playoffs. The Falcons reached the NFC Championship game in 2012.
It was reported over the weekend that the Falcons hired a search firm to help identify potential head-coaching candidates.
"Smitty's contributions to our club, team and city over the last seven years are numerous," Falcons chairman Arthur Blank said in a press release. "His accomplishments on the field made him the most successful coach in the 49-year history of the Falcons, and we are grateful for the foundation he has laid for us for the future."
The Falcons ended their season at 6-10 on Sunday after getting blown out 34-3 at home by the Carolina Panthers with a chance to win the NFC South and clinch a playoff berth. The season was also mired by a five-game losing streak and a pass defense that gave up 280 yards per game, worst in the NFL.
The defense, which gave up 26 points per game, was also ranked last in the NFL.
- Scooby Axson