Smoltz, 42, the NL MVP in 1992 and NL Cy Young Award in 1996, was 2-5 this season with an 8.33 ERA.
His release came less than 24 hours after he was shelled for eight runs and nine hits in 3 1/3 innings in a 13-6 loss to the New York Yankees, the most runs he had given up since he surrendered eight in a no-decision against the Chicago Cubs while with the Atlanta Braves on May 28, 2006.
The team said on its Web site that Smoltz returned home to Atlanta to weigh his options.
Boston has 10 days to release him or send him to the minors.
"(General Manager Theo Epstein) flew down this morning and told him face-to-face to go home, take a deep breath and think about what he was doing," Francona told reporters in New York. "He didn't let us down. His work ethic was fine. We just needed to make a change and do better."