With just pride at stake, both relegated clubs were looking to end their Championship season with a win after enduring dismal campaigns.
Bradley Wright-Phillips gave Argyle the lead at Home Park on Sunday but Mackail-Smith’s double ended the visitors’ run of three straight losses.
Despite having lost their last four matches, Paul Mariner’s men were unbeaten in seven matches against Peterborough, who have only won once on their travels this season.
Mariner made three changes from the team that were comprehensively beaten 3-0 at Nottingham Forest, with Romain Larrieu, Karl Duguid and Chris Clark replacing David Stockdale, Reda Johnson and Richard Eckersley.
Craig Morgan came in for Dominic Green after recovering from illness and goalkeeper Joe Lewis replaced James McKeown in the only changes to Peterborough’s line-up.
Chances were few and far between in a tight opening, with the best chance falling to Peterborough’s Tommy Rowe, whose strike from the edge of the area went narrowly wide in the sixth minute.
Liam Dickinson thought he’d given Posh the lead in the 26th minute after he latched onto a quickly taken free-kick and put the ball into the net, but he was flagged offside.
One minute later, Charlie Lee crossed to Dickinson and he headed wide as Peterborough looked to be in the ascendancy.
However, Bondz N’Gala hit the post from close range before Wright-Phillips opened the scoring to give Argyle their first goal in five matches.
The striker picked up the ball from Chris Clark, darted into the area and neatly finished past Joe Lewis in the 31st minute.
Joe Mason perhaps should have doubled the Pilgrims’ advantage immediately afterwards when he latched onto a pass from Wright-Phillips but shot wide.
Wright-Phillips was continuing to trouble the Posh defence with his pace and after managing to get himself into a good position, he unleashed a shot that just missed the target two minutes before the interval.
The second half, much like the previous 45 minutes, started slowly though that changed when Mackail-Smith scored two goals in seven minutes.
First, Mark Little’s cross was superbly backheeled by Dickinson, which set up Mackail-Smith to tap in his 10th goal of the season in the 63rd minute.
Then Rowe’s free-kick found Mackail-Smith and he grabbed his and Peterborough’s second with a glancing header.
Gary Johnson’s men could have gained a two-goal advantage when Romain Larrieu saved well from Josh Simpson, though they were nearly caught on the counter-attack as Wright-Phillips blazed over from just outside the area.
Argyle searched desperately for the equaliser and they thought they had it but Alan Judge’s terrific 25-yard free-kick rattled the bar as Peterborough held on to claim all three points.