The full-back is reunited there with Kris Boyd, another of the 11 senior squad members to leave Ibrox at the end of last season after their contracts expired.
Former Rangers captain Lee McCulloch has also had talks over a move to Rugby Park while Richard Foster joined Ross County earlier this week.
Smith began his career with Rangers and returned there two years ago but failed to hold down a regular place.
After his first spell at the club was blighted by a long-term pelvic injury, his more recent association with the Glasgow side saw him make 34 appearances, scoring four goals.
In between, Smith turned out for Norwich City and Aberdeen in the 2010/11 season – the latter while on loan at Pittodrie – before he joined Preston North End.
The 29-year-old also had a spell in America playing for MLS side Portland Timbers before he returned to Scotland in 2013.
Now, having committed to Kilmarnock until the summer of 2018, Smith will join manager Gary Locke and his squad for a six-day training camp in England.
He told the official Kilmarnock website: “I am really pleased to have signed for Killie and I’m looking forward to the season starting.
“My focus now though is on getting a good pre-season under my belt, starting with the training camp in Lilleshall this week.”
Locke said: “Lots of clubs were after Stevie and I am delighted we have been the one to sign him. He has bags of experience, comes from a great pedigree and fills a problem position for us.”