Terry spent 20 years at Chelsea before joining Villa, initially as a player in 2017 for a season before switching to coaching, helping the club return to the Premier League under Smith.
During a glorious career with the Blues, Terry won the Champions League, Europa League, five Premier League titles, five FA Cups and the League Cup three times.
For the first time since leaving Chelsea, Terry returns to Stamford Bridge on Wednesday night on the opposing side, plotting to help Villa boss Smith as his assistant head coach.
“He’ll be excited for it,” said Smith. “He always said he would never go back and play against them, and I’m certainly not going to pick him!
“I’m sure he will get an unbelievable reception from their supporters, and rightly so, after the playing career he had at that football club, and his ties he has.
“He’ll be looking forward to going back, and I’m sure it will be a little bit different for him, but his mind has been solely on helping myself and the rest of my coaching team to try and beat the club he loves.”
Smith believes Terry has had a significant impact with Villa during his time at the club to date.
“He’s very important and I love working with him,” said Smith. “He’s brought something different to our coaching set-up, with his knowledge, his experiences.
“He’s lifted the Premier League title enough times, as well as the FA Cup and the League Cup. He was a serial winner for Chelsea, so he knows how to win things and that mentality can rub off on people.
“I also feel he’s come into his own with us getting promoted into the Premier League. He’s getting better and better as a coach.
“I’ve championed him for a long time, saying he will eventually be a top manager. At the moment he’s very keen to keep learning and making a major contribution to Aston Villa, certainly on the coaching pitches.”
Smith is naturally hoping Terry will continue to learn for as long as possible before making the inevitable move into management.
“We’ve a good enough and an open enough relationship for him to come to me at any time,” added Smith.
“I don’t expect it in the meantime because he’s enjoying the job so much at the moment, and the important thing is he feels he’s still learning as well.
“He has a thirst for learning, a real growth mindset, which I really like to see in people. He is always asking me questions about why I make certain decisions.”
Smith will be without winger Anwar El Ghazi for the game at Chelsea due to a knee injury sustained in Sunday’s 2-2 draw at Manchester United but midfielder Jota returns after a two-month absence following hernia surgery.