Pursuing ideas of Jeff Smith, we develop a homotopy theory of ideals of monoids in a symmetric monoidal model category. This includes Smith ideals of structured ring spectra and of differential graded algebras. Such Smith ideals are NOT subobjects, and as a result the theory seems to require us to consider all Smith ideals of all monoids simultaneously, rather then restricting to the Smith ideals of one particular monoid. However, we can take a quotient by a Smith ideal and get a monoid homomorphism. In the stable case, we show that this construction is part of a Quillen equivalence between a model category of Smith ideals and a model category of monoid homomorphisms.