Scholes called time on his career at the end of last season, but appeared as a substitute during yesterday's Manchester derby having made a U-turn on his decision.
Smalling believes that the 37-year-old will have a positive impact on all of his teammates.
"Paul is going to be a real positive addition to our squad," said the defender. "I saw first hand the things he could do on the pitch and I know he can still do them.
"All of us were hoping he would come back and I am sure a few of the older lads have been saying things to him about it.
"It does pep up the dressing room when you see a player of the calibre of Paul Scholes in there."
Scholes has initially agreed to play until the end of the season.