These contain Global Positioning System tracking and can charge devices, weigh themselves or be locked remotely using mobile phones, but they are powered by lithium ion batteries, which the aviation industry regards as a fire risk, especially in the cargo hold.
Airlines are anxious that the batteries could cause a fire in the cargo hold that would go undetected.
Smart bags are luggage that contain USB ports to recharge phones, tablets, and laptops.
American was the first USA carrier to announce a new policy Friday to require passengers checking smart luggage to remove the lithium ion batteries.
Although most of the airlines will allow passengers to travel with the smart bags if the battery is removed, but numerous bags already on the market have batteries that can't be removed.
"If the battery can not be removed, the bag will not be allowed", the airlines said. Delta and Alaska Airlines have both announced these bans and other major airlines have confirmed that they have similar plans in the pipeline. Both airlines will requiring that even carry on bags must have the batteries that removed.
"Spare (uninstalled) lithium metal and lithium ion batteries are always prohibited in checked baggage and must be placed in carry-on".
Southwest Airlines and United Continental are considering creating smart-bag policies. The problem is, its lithium batteries cannot be removed.
The FAA is already concerned with lithium batteries in the cargo hold.
"The airlines' action is consistent with our guidance to not carry lithium ion batteries in the cargo hold", said FAA spokeswoman Laura Brown.
For manufacturers of luggage with nonremovable batteries, the airlines' restrictions are a blow.
"Before and at the time of production, we did our due diligence to make sure that we complied with all worldwide regulations defined by DOT and FAA", smart luggage company Bluesmart said in a statement.
While most airlines understand and approve of smart luggage, others might still be getting up to speed.
"As we speak, we are talking with the airlines so they can review our products and get the proper exemptions in place", Tomi Pierucci, co-founder and CEO of Bluesmart told Forbes.
"As this technology continues to evolve, we will work with the industry and our partner airlines to evaluate all safety policies and provide clear guidance regarding the safe use of smart bags".