Chiefs head coach Andy Reid told the NFL Network that the team is in "open communication" with Smith.
Smith is scheduled to make $7.5 million in base salary this season before becoming an unrestricted free agent next offseason.
"Well, there's open communication between both parties. Now, I'm not in that business anymore -- that's (general manager) John Dorsey's side of it -- but there's been open communication," Reid said.
"I've always believed that if there's open communication, then normally good things happen. So, I'm sure something will get done. I can't put a time frame on that, but I'm sure something will get done.
After losing his job with the San Francisco 49ers, Smith was traded to Kansas City in February 2013 for a second round pick in the 2013 NFL Draft and a conditional pick in this year's draft.
“I’ve played long enough, going into year 10 now, it’s all year-to-year in my mind anyway at this point,” Smith said last month. “You’ve got to continually prove yourself. I don’t think it changes anything as far as my mindset or approach to the game.”
Smith, 30, set career-highs in touchdown passes (23) and passing yards (3,313) in his first season in Kansas City, leading the team to a wild-card berth. BURKE & FARRAR: Cover-Two: Debating merits of NFL playoff expansion, more offseason topics