The work has been commissioned a year on from his passing as a lasting tribute to the man who won 21 trophies over two spells in charge of the club. Smith died on October 26 last year at the age of 73 with a public memorial service held at Glasgow Cathedral.
A club statement read: "On the first anniversary of his passing, Rangers Football Club are today pleased to announce a statue of legendary manager Walter Smith has been commissioned to commemorate his incredible achievements at the club.
"In the modern era, nobody contributed more to Rangers than Walter. He served as assistant manager, manager, and Chairman, with his spells as manager yielding an incredible 10 top-flight titles, five Scottish Cups and six League Cups.
A boyhood supporter who more than lived the dream, future generations will be met with this new sculpture at the famed Copland Road end of Ibrox Stadium."
Former Rangers striker Kris Boyd, who played under Smith during his second reign, welcomed the move.
"It’s a lovely tribute,” he told Sky Sports. "Nobody has contributed more to Rangers in the modern era. If there is anybody that has epitomised Rangers Football Club then it is Walter Smith.
"I think this is really important for generations going forward so they can see the greatest manager of Rangers Football Club. The way he conducted himself and the way he went about everything was a credit to Walter, his family and the club. It is a fantastic thing to do because he was Rangers Football Club.”