Smith, who was a Lion in 1997 and 2001, will begin his new role this summer.
The 40-year-old is heading back to France having previously played for Brive between 1999 and 2001, although this time he won't involved in the Top 14 after Lyon were relegated earlier this month.
Lyon are favourites to bounce back from the PRO D2 at the first attempt, however, after they secured the signings of French internationals Sebastien Chabal and Lionel Nallet and Wales hooker Huw Bennett.
The role with Lyon is Smith's second since retirement having joined Edinburgh's coaching staff under Rob Moffat three years ago.
Smith previously enjoyed a remarkable playing career, winning 61 caps for Scotland and starting all six Tests for the Lions against the Springboks and the Wallabies in the first two tours of the professional era.
His move comes just days after his propping partner for the Lions in Australia, Phil Vickery, accepted his first full-time coaching role with Worcester Warriors, while one of his fellow front rowers on the '97 tour, Graham Rowntree, is currently coaching England.