Town boss Micky Mellon feels the 19-year-old centre-back is ready for a step up in class after a season-long loan at Tamworth in Conference North.
Smith will be competing with first-choice Connor Goldson, Mark Ellis and fit-again Nat Knight-Percival when the squad returns for pre-season training next Friday.
But Mellon believes the youngster needs first-team football, either at the Greenhous Meadow or on loan at another club.
"He needs to play," said Mellon. "He needs to be playing first-team football somewhere. The young players eventually need to play men's football and Dom's at that stage now.
"If that's not with us and he's not needed here as the immediate one to step in, and we feel we're holding back his development, then it needs to be somewhere."
Chief executive Matt Williams said recently that Smith "went away a boy and came back a man" from his spell with the Lambs.
And Mellon admits the Wales Under-21 international needs to be playing senior professional football next season.
"Now it's about what happens when he gets the opportunity of playing in the first team," said the boss.
"How does he handle that first trauma, such as when the crowd boo him, the first time someone goes past him or one of his team-mates gets into him?
"That's what we don't know about these young players. It's important how they handle that.
"That's the next part of his development, when we give him these coping mechanisms. When the crowd shouts: 'Smith you're rubbish' we'll tell him to move on very quickly from that to his next moment.
"These are the things young players must go through but Dom has done brilliantly to get to that stage."
Asked if he saw Smith in his first-team plans for the campaign, Mellon said: "I hope so.
We'll think about Dom a lot and measure where he's at and do the best by him, like we do with everyone."
Meanwhile, Shrewsbury have announced their fourth pre-season friendly with the visit of Birmingham City on Tuesday, July 18 (7.45pm).
It means Town play three warm-up games at home against Championship opposition, with Cardiff on July 18 and Wolves seven days later before a trip to Conference new boys Tranmere on August 1.
The home league game with Port Vale scheduled for Saturday, March 26 has been brought forward to the previous day, Good Friday.