The 64-year-old guided the Gers to 10 Scottish Premier League titles during an 11-year career at Ibrox that spanned two spells.
Smith headed a consortium that tried to buy the stricken club over the summer before withdrawing the bid.
"It is a great privilege to serve the club that means so much to me in the capacity of non-executive director," he told Rangers's official website.
"Serious constructive efforts are being made to rebuild Rangers after a very difficult period in the club's history and if I can play a part helping that process, I am willing to do so.
"I must make it clear, however, that I will not be playing any role in the day-to-day running of the club or the team. It's the manager's job to run the team and the chief executive's job to run the club's affairs. The role I will fulfil is to bring my experience of Rangers and football in general to the board table and that is what I will do."
Smith will be joined as a non-executive director by Ian Hart.