The forward has put pen to paper on a deal that will see him tied to the Dons until 2017.
Smith joins Peter Pawlett, Jamie Langfield and Jonny Hayes in committing himself to the club for an extended period, and shows his determination to prove himself in the SPFL.
Smith said: "As soon as the manager said he wanted me to stay it was a really easy decision for me to make. I'm an AFC fan so it means a lot to me.
"I was never tempted to look down south. It was a no brainer to stay here and try to progress and play regular first team football.
"I really enjoy working with Derek and Tony. As a young boy it's great to be part of that and hopefully we can bring success to the club."
Fraser Fyvie is currently on loan at Yeovil Town in the English second tier, where he has played two games this season.