Reed underwent offseason hip surgery and did not practice during training camp or play in the preseason. The six-time Pro Bowl star missed four games last year because of hip problems after playing every game from 2006-08.
Tom Zbikowski replaced the injured Reed in 2009 and performed well at the position this preseason. He is expected to start against the New York Jets in the Sept. 13 opener.
Smith, the 2006 Heisman Trophy winner, played in 14 games over three seasons with Baltimore. He served as the backup to Joe Flacco last year, but the acquisition of veteran Marc Bulger during the offseason made Smith expendable.
"The competition to make our team was very heated, and we decided to keep a position player rather than a third quarterback," general manager Ozzie Newsome said. "We have a number of young guys who made our team who have tremendous upside, plus they can help us win this year. We've gone with two quarterbacks before."
Cundiff prevailed in the duel with Graham, who was signed as a free agent in June after spending six straight seasons with the Cincinnati Bengals.
"Congratulations to Billy. He won a great competition and he earned this spot," coach John Harbaugh said. "Both Billy and Shayne rose to the occasion and performed at high levels. We know Shayne will kick in the league, but we feel very good about the decision to go with Billy."
The Ravens also traded outside linebacker Antwan Barnes to the Philadelphia Eagles for an undisclosed 2011 draft choice. The move should enable rookie Arthur Jones, a fifth-round pick out of Syracuse, to receive more playing time.
"I'm real excited. I'm more motivated than ever to prove myself," Jones said. "I can't wait to get to practice Monday. I want to show them they did the right thing by keeping me."
Another notable cut was wide receiver Demetrius Williams, a fourth-round pick in 2006 who battled injuries for much of his four-year stay with the Ravens. He had 63 catches, just eight last season.