After serving as an assistant head coach under Erickson for seven seasons, Smith began his head coaching career in 1989 at Idaho, where he posted a 53–21 (.716) record in six seasons.
Under his leadership, the Vandals won two Big Sky championships and made the 16-team NCAA Division I-AA playoffs five times, advancing to the national semifinals in 1993.
Smith's 53 wins remain the most in school history, seventeen clear of runner-up Erickson (36 in five years). He became the first UI coach to be granted a multi-year contract, with a four-year deal in January 1991.
Smith inherited an 11–2 team from Keith Gilbertson that had made the I-AA semifinals in 1988, and returned All-American quarterback in John Friesz. Despite losing the first two games of the 1989 season to Washington State and Portland State, Idaho went undefeated (8–0) in conference play, the only time in school history; the Vandals lost in the first round of the I-AA playoffs and finished at 9–3. Friesz won the Walter Payton Award, was drafted by the San Diego Chargers, and spent a decade in the NFL. Smith's next Vandal quarterback was southpaw Doug Nussmeier, who threw for over 10,000 yards and won the Walter Payton Award in 1993; he was drafted in the fourth round by the New Orleans Saints.