During the Shoreditch Incident, Smith was working as an informant for George Ratcliffe. He had a romantic interest in Ace. He knew some of the Daleks' plans on Earth at the time and that they were seeking the Hand of Omega. Over the course of the Seventh Doctor's investigations, Smith was outed as an informant. He was detained, but later escaped to the Renegade Daleks' base.
There, Smith and Ratcliffe were betrayed by the Renegades. They were saved from extermination by an attack on the Renegades by the Imperial Daleks. Stealing the Time Controller from the Renegade Daleks, the two fled, pursued by the Girl, who quickly killed Ratcliffe. Escaping to his mother's boarding house, Smith ran into Ace. Failing to convince her to join his crusade, he held her at gunpoint. Answering a knock at the door, Smith was attacked and killed by the Girl. (TV: Remembrance of the Daleks) He was denied a military funeral and buried privately by his family five days after his death. (PROSE: Who Killed Kennedy)
The Doctor later discovered Ace beating up a teddy bear in her room aboard the TARDIS, yelling that it betrayed her. When she went to the bath, he sneaked in and found "Mike Smith" written on the bear. (PROSE: Legacy)