Smith joined the team as an assistant coach in 2008 and became interim head coach for the final 11 games of that season.
Following the conclusion of the 2008 season, he was given the permanent tag and helped the team to a victory over FC Dallas to win the MLS Cup in 2010.
The 2011 season saw him guide the Rapids to a mark of 12-9-13 to clinch a playoff spot, but they were eliminated by Sporting Kansas City in the Western Conference semifinals.
"After meeting with Gary, we decided it would be in the best interest of both parties to move in a different direction," said Colorado managing director Jeff Plush. "We'd like to thank Gary for his many contributions to the Colorado Rapids organization. He was instrumental in the Rapids winning our first-ever MLS Cup last year, and we wish him nothing but the best as he explores new opportunities."
Over his three-plus seasons as head coach, his team posted a record of 39-31-35.