Dr Smith of the University of Missouri and Sir Gregory of the MRC Laboratory of Molecular Biology in Cambridge, England, share the other half of the prize.
That setback set the stage for a new vision - using evolution to redesign enzymes for use in biotechnology - that earned Arnold the 2018 Nobel Prize in Chemistry today. Enzymes are complex proteins that make many chemical reactions possible.
The first drug based on this work is used against rheumatoid arthritis, a skin condition known as psoriasis and inflammatory bowel disease.
Here's a breakdown of who Frances Arnold is and how her breakthrough in mutating and creating enzymes has been vital in everything from new medicines to renewable fuels.More news: British PM Theresa May kicks off keynote speech with ABBA's 'Dancing Queen'
"In the lab, she's speeding up [evolution] by shuffling genes artificially - and doing it smartly she hopes - by figuring out which elements have a fighting chance of producing proteins that actually work and maybe even do something useful", wrote NPR's Scott Hensley.
Arnold won one half of the nine million Swedish kronor (about $1.01 million or 870,000 euros) prize, while Smith and Winter shared the other half.
Douglas Kell, a professor of bioanalytical science at the University of Manchester, says the prize is "fantastic news". Smith showed in 1985 that inserting DNA into these viruses would make them display proteins linked to that DNA on their surfaces. Their work involved the development and use of a technique called phage display to direct the evolution of antibodies, immune proteins that can be used to block biological processes, into various forms. Winter then used phage display to evolve new types of antibodies that could act as drugs. Antibodies are proteins that help fight infection in the body.
The chemical name of the drug is adalimumab, which has several trade named including Humira, one of the top-selling drugs in the world.
Smith created a process that helped develop new drugs that are now being used to treat cancer, rheumatoid arthritis, psoriasis, and inflammatory bowel disease.More news: Aston Villa fan launches a cabbage at Steve Bruce during Preston clash
"That was certainly the case with my work".
She said that while historically it was true that far fewer women than men worked in research, the scientific community needed to wake up the field's changing demographics. "Virtually all of them build on what went on before", he said.
Clearly his entrepreneurial vision, ability to surround himself by extremely competent people and openness to new techniques such as phage display makes him a worthy victor of this year's Nobel Prize in Chemistry. Chemistry is the third of this year's Nobel Prizes after the winners of the medicine and physics awards were announced earlier this week.
Arnold told the Princeton Alumni Weekly in 2014 that her methodology had initially been viewed skeptically by "gentleman scientists", but she told herself, "I'm not a gentleman and I'm not a scientist" - she still identifies as an engineer - "so I didn't mind".More news: Nobel Prize in Physics jointly awarded to trio of laser physics inventors