The 29-year-old All Blacks fullback suffered the concussion during his side's 32-20 victory over Western Force on April 1 and missed the defeat to the Reds in Brisbane eight days later.
The Highlanders, who had a bye last week, said on Wednesday Smith had passed concussion tests and named him in the team at fullback to face South Africa's Sharks in Dunedin on Friday.
Smith's return to the number 15 jersey means Matt Faddes returns to the right wing, while Jack Wilson moves to the left and Patrick Osborne drops to the bench.
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Loose forward Elliott Dixon, whose performances this season have done his All Blacks chances no harm, also returns following a head cut received against the Force.
The Highlanders had won five successive games before being tripped up by the Reds, who had not registered a victory this season until meeting the 2015 champions.
The Highlanders are fourth in the New Zealand conference on 23 points and occupy the fifth and final playoffs spot in the Australasian Group.
The Sharks are fourth in the South African group on 17 points and in danger of losing touch with the third-placed Bulls (23), who occupy the wildcard spot in the eight-team group.
(Reporting by Greg Stutchbury; Editing by Peter Rutherford)
