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On two earlier occasions the 38-year-old fisherman had responded to a roped whale and both times he had managed to free them.
Mr Smith is now presumed dead after being hit by the giant tail fins of the creature he was trying to save.
Thirty tourists, mostly British, on a whale watching adventure watched the tragedy unfold.
Mr Smith, whose wife, Claudine, is pregnant with the couple's third child, was on board his charter vessel the Bounty with his father-in-law and a friend when fishermen alerted him to the trapped whale, about 10m to 12m long.
Whale Watch Kaikoura spokesman Thomas Kahu said the tourists were watching the whale about 11.45am when Mr Smith arrived and leaped into the water about 500m from the shore at South Bay.
He was trying to cut the line attached to a crayfish pot when the whale fractionally lifted its tail, smashing it down on its rescuer underneath.
A Whale Watch Kaikoura boat had been first to the scene and had phoned the Department of Conservation. While its crew were waiting for DoC, Mr Smith's boat arrived and he put on his dive gear to attempt the rescue, Mr Kahu said.
"He was very keen to assist. He hopped in the water and he was within really close proximity of the whale.
"He saw the whale put its tail up and he then tried to dive," Mr Kahu said.
"After the water had settled from the whale hitting it, the bubbles from Mr Smith's tank were unable to be seen, so we called Search and Rescue."
As well as the tourists seeing the whale smack its tail on the water, Mr Smith's two companions saw him disappear.
The tourists urged their boat's crew to stay and search for him for 1 1/2 hours.
Mr Kahu said Mr Smith had tremendous ocean experience. He would take out visitors on fishing, diving and bird-watching trips.
A friend, Murray Boyd, said: "He just lived down the road and was really well-known.
"He was a lovely guy and this is an absolute tragedy."
Kaikoura police have laid out fishing nets in the hope of retrieving Mr Smith's body.
Sergeant Tony Yardley said there was no chance of finding Mr Smith alive.
Police, Kaikoura Coastguard and locals searched the area, only giving up after four hours when they knew there was no hope of finding him alive.
Last night, the whale was still trapped in the crayfish line as DoC staff were unable to cut the rope.
The humpback had limited movement and was agitated, and it was feared it would drown if it did not free itself overnight.
DoC's area manager for South Marlborough, Dave Hayes, said:
"Humpbacks can get violent - they can thrash about quite severely."
Mr Smith once described saving a humpback whale as "a real once-in-a-lifetime encounter" after he freed it from craypot lines in Kaikoura in June 2001.
He said he donned scuba gear and made eye contact to let the whale know he was there.
"As I swam up I could see it drop its head and thought it was going to dive, but what it did was to lift its tail and lay dead still while I cut off the float and the last of the rope."
After the whale was freed, it came up right beside the boat, where it stayed for a few moments, before lifting its tail and slowly swimming away.
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