Smith, guard/forward, and there other players had been on indefinite suspension after being arrested by Knoxville police Jan. 1. The other three players remain on suspension.
"We felt we had enough information at this time to dismiss Smith," Pearl said in a statement on the school's Web site Friday.
"I am truly sorry for my actions in the recent case that everyone is familiar with," Smith said.
Police said Smith, Cameron Tatum, Melvin Goins and Brian Williams were arrested after a rental car driven by Tatum was stopped for speeding and a search turned up two guns, a bag of marijuana and an open container of alcohol.
Smith, a 6-foot-7 senior from Pulaski, Tenn., averaged 11.7 points and 4.7 rebounds in 12 games.