Smith, who took the 49ers to the NFC Championship Game after starting each of the team's games in 2011, has struck a deal to stay in San Francisco, reports by the San Jose (Calif.) Mercury-News and the NFL Network indicated.
The signal-caller tossed for 3,144 yards and 17 touchdowns on 445 attempts while guiding San Francisco to a 13-3 record. The agile Smith rushed 52 times for 179 yards and two TDs.
He had been in discussions with the Miami Dolphins as rumors swirled the 49ers were in the market to land Peyton Manning, who instead signed with the Denver Broncos Tuesday.
The Dolphins eventually inked David Garrard as their new quarterback.
Smith turned down a three-year, $24 million offer from San Francisco before the NFL free-agency period began.