The former Saddlers captain was installed as manager at the start of last year and he has impressed the Walsall hierarchy sufficiently to sign a new two-and-a-half-year contract with the club.
Smith said: "I am delighted that the club has offered me this new deal and I am only too pleased to pledge my future to Walsall.
"We have a strategy in place here and a policy running throughout the whole club that will allow us to move forward together and get to where we want to be. Having this deal allows me to continue to plan ahead and build."
Walsall are currently in 13th place in the League One table.