City pipped United to the Premier League title on goal difference last season but the title race looks to be all but over with the Reds 15 points clear at the top this time round.
The two could also meet in the FA Cup semi-finals should United beat Chelsea tomorrow, and Smalling admits that beating them in both competitions would be nice.
"When we saw the [FA Cup] draw, it was definitely the case that the prospect of playing City gives us extra incentive," Smalling told reporters.
"It's at Wembley as well so it would be a massive occasion. But we need to make sure we get past Chelsea, which won't be easy.
"It would be the ultimate revenge to beat City to the Premier League title and knock them out of the FA Cup, especially after last year. It would be sweet."
United face Chelsea at 12.30pm tomorrow afternoon.