Smith made one appearance for the side last season, which came in a 1-1 draw with Bolton Wanderers at the Mazuma Stadium.
After signing on the dotted line, Smith said: “I am delighted to get it all sorted, I’ve really enjoyed my time at the club, it was a no-brainer for me.
“I mentioned in my first interview that I wanted to stay at Morecambe for as long as possible, so hopefully this is the start of a long, successful journey.
“Pre-season is almost upon us and I am looking forward to meeting my new teammates and hopefully build some strong friendships like I did last season, I’ve played with a couple of the new signings previously, so I’m looking forward to seeing them again.
“The fans were brilliant last season, I have seen that we have already sold a load of season tickets this year.
"I would like to thank them for their support, home and away, and I’m looking forward to seeing them again for another exciting League One campaign.”