Smith was replaced in the first half of New Zealand's 30-15 first-test victory in Auckland last weekend after suffering his third concussion this year.
Smith, who has returned home to Dunedin, was not named in Hansen's squad for the second test in Wellington on Saturday, with Israel Dagg switching to fullback from the wing.
Hansen told reporters in Wellington that team vice-captain Smith would play no further part in the series.
"We decided already regardless of how he goes through the protocols that we wouldn't play him next week," Hansen added.
Hansen had said after the first test it was concerning that Smith had sustained several head injuries in such a short space of time.
"Long-term concerns have been allayed, but we're just going to take our time with him and get him back to where he needs to be so that he's comfortable and we're comfortable," Hansen said.
"This one is not any more severe than the other ones. If he had passed the protocols and been cleared to play we still wouldn't have picked him.
"It's too important for him and us to just chuck him straight back out there ... so we decided to be conservative and not play him.
"He doesn't know that yet, but I'm sure he will shortly," he added with a grin at the large media contingent.
New Zealand's players will return to their Super Rugby clubs after the third test, which will be back at Eden Park on July 8, before getting back together in August for the southern hemisphere's Rugby Championship.
The world champions open their defence of the Rugby Championship title against Australia in Sydney on Aug. 18.
(Editing by Peter Rutherford)
