Among rank and file staffers and even some of the network's anchors,there is deep concern that the news side of Fox will be further squeezed by the opinion shows that President Trump and his supporters prefer.
For that reason, and many others, he was a role model for journalists at the network, and that's why the loss is "heartbreaking," in the words of one of a dozen sources who spoke for this story on condition of anonymity.
"His departure comes at a tough time for this country," one of the staffers said. "We're going into an election that promises to be the most chaotic one we've ever seen. The President himself is on the verge of being impeached. We're heading into some uncharted territory here and without Shep to help reign in the chaos, I fear things are going to get much, much worse."
Smith went to Fox News management and asked to be let out of his $15 million per year contract. He said the executives tried to convince him to stay, but eventually let him leave.
The past few years at Fox -- with the departures of Bill O'Reilly, Megyn Kelly, and other major stars -- have shown that the network chugs along no matter who is in the hosts' chair. Fox has a tremendously loyal audience. So from that perspective, everyone is replaceable, including Smith.
But his exit is a definite blow to morale for the network's journalists, according to the sources interviewed for this story.
And it highlights the turmoil between Fox's newscasts and its higher-rated talk shows that actively undermine those newscasts while defending Trump at all costs.
Sources at Fox certainly hope that's not true, and they point out that the network has dozens of experienced journalists in key roles in New York, Washington, and beyond.
But Fox's reporting ranks have been shrinking in recent years, according to former chief political correspondent Carl Cameron and other Fox veterans. Fox has reduced its number of bureaus outside the United States and emphasized right-wing talk shows over newscasts.
Arguably the network's programmers are just following the lead of the viewers: Entertaining and argumentative shows like "Fox & Friends" and "Hannity" are more popular than newscasts like "Shepard Smith Reporting."
Having Smith on at 3, though, was very important to the network's journalists. "Shep had power that almost none of us had," a veteran staffer said, asserting that Smith could fact-check deceptive politicians and call out indecency much more strongly than other anchors and reporters.
That description only applies to a small number of others at Fox, most notably Chris Wallace.
Fox's news anchors have come under significant pressure in the Trump years, partly because many of the network's viewers bristle at coverage of the president that seems tough or critical.
Fox typically chooses not to respond to the president's barbs --perhaps knowing that he's trying to drive a wedge between the news side and the opinion side.
Even some of the shows categorized as newscasts on Fox tilt noticeably to the right, staffers acknowledge.
But Smith had enough power to resist those pressures. His fans inside inside Fox were devastated by his departure.
And network management clearly anticipated some of these reactions.
"We know this was an extremely difficult decision for him and he made it with much deliberation, care and consideration," Fox News CEO Suzanne Scott and president Jay Wallace wrote in an internal memo Friday. "While this day is especially challenging for both of us who have worked alongside him for 23 years, we respect his decision and are deeply grateful for his immense contributions to the entire network."
They added: "We also know this day is just as difficult for those of you who had the fortune of working closely with Shep for so many years... We are incredibly proud of the signature reporting and anchoring style he honed here, along with everything he accomplished during his monumental 23-year tenure."
On Monday, his 3 p.m. time slot will be called "Fox News Reporting." A series of "rotating news anchors" will host the hour, Fox said.
Anchors at Fox are already jockeying for the time slot. But they wonder what the network's executives will want -- someone like Smith who called out the president's lies with gusto, or a more measured voice who won't provoke as many complaints from Trump fans?
Powell in an email described Smith as a source of journalistic integrity, and he wondered if anyone would fill that void.
"Fox News isn't just losing Shepard," he said. "He surrounded himself by a team of really good producers and reporters who forced correspondents to do more than talking point reporting."
Powell said his fear is that Smith leaving "means the Hannity and Tucker narrative will face no internal resistance."
Oliver Darcy contributed to this report