With rain reducing the test to a final day shootout, Australia ran through Pakistan for 163 inside 54 overs to close out an innings and 18-run win in the final session at the Melbourne Cricket Ground.
The win gave Australia an unassailable 2-0 series lead, with the third test in Sydney next week, and a valuable shot of confidence for a team in transition.
Australia were effectively rebooted after being thrashed by South Africa in Hobart, a loss which surrendered the test series to the Proteas, but have now won their last three matches in a row.
"It can give you that belief, to know you're never out of the game or you can pull a win out of your hat from nowhere," Smith told reporters.
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"It was quite remarkable the way we were able to do that today. Everything went to plan -- it was one of those days.
"Hopefully the guys can take a lot of confidence out of the way they've played this week."
Smith was named man of the match for smashing an unbeaten 163 before declaring Australia's first innings at a mammoth 624-8 just before lunch.
SOLID CAPTAINCY
However, paceman Mitchell Starc was unlucky not to receive the award, having blasted 84 with the bat in the morning, including a record seven sixes at the MCG, and returned figures of 4-36 to close out the win.
Smith paid tribute to the dominant left-armer but was also pleased for spinner Nathan Lyon, who returned to form with a three-wicket spell in the middle session that broke open Pakistan's second innings.
From there, Smith withdrew the spinner after tea and had Starc and pacemen Josh Hazlewood and Jackson Bird rattle through the last five wickets as the ball reversed.
Smith received plenty of flak for his captaincy in the 39-run series-opening win in Brisbane.
He declined to make Pakistan follow on and was criticised roundly for his tentative field settings on the final day as the tourists put a fourth innings total of 450 on the board, a record in Australia, to give the home side a huge scare.
But there was little to fault in Melbourne, where Smith's 17th test ton secured a 181-run first innings lead to pressure Pakistan's batsmen, while allowed his bowlers to smash through for victory.
"We're still a work in progress, we're a young team and I'm proud of the boys," the 27-year-old said.
"It was phenomenal the way we could turn things around.
"But we want a clean sweep in Sydney and we need to continue to improve in every aspect."
(Editing by John O'Brien)
