The former Dundee and Alloa Athletic boss took over in May 2017 but Rovers were pipped for the title by Ayr United last season then lost to Alloa in the play-offs. Raith thumped Forfar 4-0 on Saturday but Smith has decided to call time on his Stark's Park career.
A club statement issued on Tuesday night said: "The Board of Raith Rovers Football Club have this evening reluctantly accepted the resignation of manager Barry Smith.
"Kevin Cuthbert has agreed to be in charge of all football matters for the (IRN-BRU Cup) game on Saturday against Ross County. The board are now considering all options for taking the club forward.”