Batsman Cameron Bancroft was tasked with carrying out the tampering by using yellow sticky tape to pick up "granules" beside the pitch and rub it on the ball to rough it up in an attempt to get it to reverse swing on day three at Newlands.
But Bancroft was caught doing it on the field by television cameras, and then attempted to hide the evidence by shoving the tape down his trousers before he was questioned by umpires.
"The leadership group knew about it," Smith said, admitting he and senior players who he would not name planned the cheating during the lunch break.
"We spoke about it and thought it was a possible way to get an advantage … poor choice and, yeah, we're deeply regrettable.""We spoke about it at lunch and I'm not proud of what's happened. It's not within the spirit of the game.
The tampering and hiding of the tape was replayed over and over in slow motion and close up, on the big screen at Newlands and on television. Bancroft then confessed.
"I saw an opportunity," Bancroft said, "to potentially use some tape and get some granules from the rough patches of the wicket and try to change the ball condition.
The confessions by Smith and Bancroft at the post-day news conference provided the most shocking moment in a series that has contained a multitude of contentious incidents and off-field drama. None as jaw-dropping as this, though."It didn't work. Once I was sighted on the [stadium] screen I panicked quite a lot, and that resulted in me shoving it [the tape] down my trousers."
Bancroft was charged with ball tampering by the match officials and has since admitted to the charge.
It also wasn't revealed if Smith and other players were facing charges of bringing the game into disrepute.
They can be charged under the International Cricket Council code of conduct and bans could be handed out.
Smith said he would not resign as Australia captain.
PHOTO: Australian batsman Cameron Bancroft admitted his guilt. (AAP: Dave Hunt)
'Wrong place at the wrong time'Although ball tampering to various degrees happens in cricket, Smith and Bancroft revealed a conspiracy in the Australian dressing room where senior players discussed how they could cheat to get back in the game and the series, then roped in a young member of the squad to do the deed, and then got caught by television cameras and had to face the music.
Bancroft said he was "in the wrong place at the wrong time" when he got involved.
"You know I was in the vicinity of the area when the leadership group were discussing it and look, I'll be honest with you, I was obviously nervous about it because with hundreds of cameras around there's always a risk, isn't it?" he said.
The scramble to hide their actions exacerbated a low moment in Australian cricket, which has a proud history as one of the stalwarts of the game.
Smith insisted coaches were not involved in the plan in Cape Town and had no knowledge of it, and he declined to name the other players involved.
The team's "leadership group" has previously included vice-captain David Warner, and bowlers Nathan Lyon, Mitchell Starc, and Josh Hazlewood.
"I'm not naming names," Smith said.
He also insisted this was the first time tampering happened on his watch as captain, denying that Australia's big victory in the opening test in Durban, where fast bowler Starc got the ball to reverse swing with deadly effect, was also aided by tampering.
PHOTO: Australian cricket team captain Steve Smith admits part in ball tampering. (AAP: Richard Wainwright)
Using a foreign object to rough up or change the condition of one side of the ball can help it swing in the air, or do other unpredictable things, making it tougher for batsmen to face.
The use of foreign objects to tamper with the ball is strictly prohibited in cricket.
Questions will still be asked now about previous Australia successes, and other moments in this series.
Warner came under scrutiny in the second test in Port Elizabeth for strapping he wore on one of his hands, with suggestions it could change the condition of the ball when he rubbed it with that hand.
"You can ask questions as much as you like but I can promise you that this is the first time that this has happened," Smith said.
"I've made it clear that we're regrettable and we'll move on from this and hopefully we'll learn something from it. I'm embarrassed and I know the boys in the shed are embarrassed as well."
Smith said, "if we weren't caught, I'd still feel incredibly bad about it".
Also subject to scrutiny is how far the Australians went to try and cover up the tampering.
There was movement of players, including Smith, on and off the field in the immediate aftermath of Bancroft's actions being caught on cameras.
Former West Indian fast bowler Michael Holding was part of the International Cricket Council when a ball tampering controversy led to Pakistan abandoning a test against England.
He said the umpires should have taken action against Australia much sooner.
"If you get to the point where you think something is untoward the rules are clear, you change the ball, you give the batting team five runs," he said.
"I was there at the oval with the Pakistan-England test match that was eventually abandoned because Inzamam-ul-Haq was adamant that he had done nothing to the ball.
"All the evidence at the oval is nothing compared to this."