Smith, 26, has failed to break itnto the Royals first team since joining the club from Port Vale sixteen months ago and has made just eighteen appearances. He is viewed by many as something of a rarity, a bad signing by Alan Pardew.
Shrewsbury Town boss Kevin Ratcliffe revealed that he was delighted to seal a deal for Smith, who will wear squad number thirty-one during his spell with the Gay Meadow based side.
Ratcliffe told the Shrews official site: "Smith is an experienced player. Born in Liverpool he has played over 130 league games.
"With Leon missing because of suspension on Saturday and Andy Thompson and Ian Woan out through injury he will act as covger down the left-hand side."
Smith can already list Port Vale, Swindon, Chester Huddersfield and Everton amongst his former clubs. Indeed, he could even play against one of his former sides in Everton during his loan spell. The Shrews are scheduled to play Everton in the FA Cup Third Round on the 4th January.