Smith and opening batsman Cameron Bancroft, the player caught on camera attempting to doctor the ball with a piece of tape, have been banished for their role in an incident which has dragged Australian cricket's reputation through the mud.
Vice-captain David Warner was also sent packing, amid reports of a massive falling out between him and the team's fast bowlers who feel they have been unfairly linked to the row.
Wicketkeeper Tim Paine will take over the captaincy for the fourth and final Test starting in Johannesburg Friday, with hosts South Africa leading a bad-tempered series 2-1.
Matt Renshaw, Glenn Maxwell and Joe Burns are jetting to South Africa as replacements.
But coach Darren Lehmann escaped punishment and will remain in charge, team management said in Johannesburg, with further sanctions on the three players to be announced shortly.
"I understand and share the anger and disappointment of Australian fans," Cricket Australia chief James Sutherland said of the controversy in the third Test in Cape Town last Saturday.
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"On behalf of Cricket Australia, I want to apologise to all Australians that these events have taken place, especially to all the kids."
Australian Cricketers' Association chief executive Alistair Nicholson said serious mistakes had been made by Smith and his co-accused, and they understood this.
"The players are remorseful for the mistakes they have made. And they regret how their actions have represented themselves, teammates, cricket and their country," he said.
Smith, in particular, is reportedly distraught and support is being offered to help him cope.
"The ACA is providing legal and welfare support to all players. Welfare of all players is a highly relevant consideration," said Nicholson.
Smith had already been suspended for one Test and docked his entire match fee by the International Cricket Council, and Sutherland said further punishments "will reflect the gravity of the situation".
Bancroft used a strip of yellow sticky tape he had covered with dirt granules to illegally scratch the rough side of the ball, in an attempt to generate more swing for Australia's bowlers.
He was filmed not only rubbing the ball with the dirtied tape but also concealing the evidence down the front of his trousers.
Smith said after the Test that the Australians' "leadership group" had been aware of the plan.
However, Sutherland insisted Lehmann was not aware of the plot.
"Prior knowledge of the ball tampering incident was limited to three players... No other players or support staff had prior knowledge and this includes Darren Lehmann, who despite inaccurate media reports, has not resigned from his position," said Sutherland.
Former Australian captain Michael Clarke, the man Smith succeeded in 2015, believes there is more to the story that meets the eye.
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"Too many reputations on the line for the full story not to come out. Cape Town change room is a very small place!" he tweeted.
Former England Test captain Michael Vaughan was similarly unconvinced, tweeting "Only 3 people knew ... #MyArse."
He added: "Me thinks the Hole has just got a little deeper & bigger for Cricket Australia," while ex-England star Kevin Pietersen tweeted: "Lehmann never knew," followed by a host of laughing emojis.
Warner, a divisive figure in the world game, has become the focus of Australian media, who blame him for the scandal.
In a front-page story, The Australian newspaper said there had been a "fierce feud" in the dressing room sparked by Warner's alleged testimony to Cricket Australia's integrity officers, with pace spearheads Mitchell Starc and Josh Hazlewood reportedly livid at being implicated.
It said they felt he was willing to blame them to take the heat off himself, with emotions so raw that Warner may never be welcomed back.
The Sydney Morning Herald took a similar tack, claiming the other players had turned on Warner in the belief that he had attempted to "throw them under the bus".
It quoted sources close to the team as saying the prominent narrative from their interviews with investigators was that the plan was devised by Warner and Bancroft and Smith agreed to it.
Warner quits as Hyderabad IPL captain after tampering scandal
Disgraced Australian batsman David Warner stepped down Wednesday as captain of Indian Premier League side Sunrisers Hyderabad over the ball-tampering scandal, the team announced.
Australia captain Steve Smith had already been replaced as skipper of rival side Rajasthan Royals in the cash-rich Twenty20 competition due to start next month as the controversy rages on.
"In light of recent events, David Warner has stepped down as captain of Sunrisers Hyderabad. The new captain of the team will be announced shortly," Sunrisers chief executive K Shanmugam said on the team's official Twitter page.
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