The 33-year-old Northern Ireland international has been at the club since 2017 and will stay an extra year after following Stephen Kingsley in penning a new deal on Thursday.
The Jambos have been busy tying down their existing squad members to new contracts this year with Craig Gordon and Craig Halkett also agreeing extensions.
Robbie Neilson told the club website he was “really pleased that we’ve got Michael tied down for another season”.
He added: “He’s a top player, an international-standard defender and his versatility makes him a tremendous asset for us.
“I know he’ll help drive us on to our goal of challenging at the top end of the league and for European football.”
Smith has played 157 times in Gorgie and amassed 18 of his 19 international caps while at Tynecastle.
Sporting Director Joe Savage added: “Michael’s one of the longest-serving players in the squad for a reason; he’s a really talented and versatile player and a model professional.
“Those are the types of guys you want in your team and it made absolute sense for all parties to extend his contract by another year.
“The fans have really taken to him over the past five years and for any young player coming through our youth system, Michael is someone they should look up to.”
While his two defensive colleagues have joined him in re-signing, John Souttar’s deal remains up for renewal and due to expire at the end of the season with clubs including Rangers, Sheffield United and Nottingham Forest interested.