The present disclosure relates to an SMS processing method in an Internet of Things, a mobility management network element, and a terminal device, to provide an SMS service for an Internet of Things terminal device. One example method includes receiving, by a mobility management network element in a packet switched (PS) domain, a non-combined registration request from a terminal device. The non-combined registration request carries SMS only indication information. When determining that the mobility management network element in the PS domain cannot transfer an SMS for the terminal device through the PS domain, the mobility management network element in the PS domain sends a location update request to a mobility management network element in a circuit switched (CS) domain. The location update request is used to implement registration of the terminal device with the CS domain.