All-star shortstop Ozzie Smith signed a four-year contract extension through 1989 with the St. Louis Cardinals yesterday that his agent claims makes him baseball's highest-paid player.

"In terms of dollars and cents, it makes him the highest-paid player," said Ed Gottlieb, the agent, who said Smith will make more than $2 million a year.

"I think the highest contracts are (Philadelphia's Mike) Schmidt and (the New York Mets' George) Foster at $2 million," Gottlieb said. Or "were."

Negotiations with Smith had begun in earnest last month, and at one time it appeared likely he would be traded.

"I'm happy and hopefully the organization is happy. It's a great day," said Smith. "At one time, it didn't look good. I have great memories here."

At the news conference to announce the agreement, Cardinals owner August A. Busch Jr., 86, likewise declared it "a great day."

Gottlieb said the final negotiating point was a provision permitting Smith to buy a distributorship from Anheuser- Busch Inc., owner of the Cardinals. He'll work for the brewery starting next offseason.

Gottlieb said the contract is guaranteed, meaning the club will pay Smith even if he is incapacitated by injury.

Rumors that the Cardinals, who let premier reliever Bruce Sutter go to Atlanta as a free agent last winter, would trade Smith began during spring training because the fielding wizard was in the final year of a three-year, $3.6 million contract. In the past two weeks, the Cardinals traded for shortstops Jose Oquendo from the New York Mets and Ivan DeJesus from Philadelphia as a hedge.

Last year, Smith hit .257 and stole 35 bases. A four-time National League all-star, the 150-pound switch hitter had a .238 career average in 1,006 games with San Diego and St. Louis coming into this season . . .

The Boston Red Sox have placed right-handed pitcher Bruce Kison on the 21-day disabled list with a pulled left hamstring muscle and reactivated right-hander Al Nipper, naming him to pitch Wednesday at Kansas City.