The “Smear Effect” observed during a casing-while-drilling operation helps reduce lost circulation, provides wellbore strengthening, and improves the fracture gradient so we can drill more effectively through depleted reservoirs. Several case studies have been reported confirming the formation of a smear zone around the wellbore wall, due to the plastering of cuttings and added lost circulation materials. However, even after successful application in a number of cases, a thorough understanding of the parameters affecting the formation of the smear zone and the subsequent increase in the fracture gradient is not available. This study analyses the theory behind the phenomenon of the smear effect mechanism using case studies and existing literature, and then applies analytical models to estimate the improvement in the fracture gradient based on the drilling parameters and reservoir properties. The formation of the smear zone has been investigated by modeling the mechanism of initiation of micro-fractures around the wellbore wall due to high equivalent circulating densities (ECDs) occurring during casing while drilling. The effect of plugging of these generated micro-fractures by the drilled cuttings and additional lost circulation material added has then been modelled, to estimate the resultant improvement in fracture gradients expected along the wellbore open hole section. In addition, the appropriate particle size distribution required to successfully plug the micro-fractures has also been presented. These analytical models have then been applied to a simulated field case study and the results have been analysed in the context of recorded field observations to simulate the smear effect using the proposed models. The contribution of the casing size and length, formation properties, and operating parameters on the initiation of micro-fractures and the increase in fracture gradient has also been presented to better demonstrate the mechanism of the formation of the smear zone. This analysis is one of the first of its kind of theoretical study to understand the fundamentals of the smear effect mechanism and can be suitably applied to enhance our understanding of the smear effect to use it better to our advantage.