Smith is an attacking midfielder who began as a trainee at Arsenal. He scored an impressive looking 14 goals from 32 appearances last season, despite being phased out towards the end.
Town Assistant boss Dave Cooke revealed that the club had been tracking the player all season. He said: 'He caught our eye at the start of last season and we've monitored him since then'.
Cooke also said that the Shrews had convinced Smith to join despite interest from Conference champions Chester and other third division teams. He added: 'Ben came in, saw the club and was impressed with the ambition of Shrewsbury Town and of Jimmy Quinn.'
Smith will strengthen the ranks in midield and should also weigh in with a few goals. Town are now set to turn their attention to searching for a new striker, after the acquisition of Stuart Whithead recently.