The Saddlers were languishing in 18th place in the League One table in December, but lost just three games from then until the end of the campaign to finish in ninth place.
Smith took the opportunity to reflect on his side's achievements before looking ahead to the new campaign.
He told the club's official website: "I am extremely proud to be manager of this football club. We can look back on 2012/13 with real satisfaction.
"I was given the opportunity to bring forward a philosophy this year and even though it's only our fledgling season with it, much progress has been made and that is great credit to everyone involved.
"We look forward to keeping this progression going into next season and beyond. It's a long-term project and solid foundations have been laid."