Smith is guaranteed $26 million with his new six-year, $70 million contract, a source told ESPN.com's Len Pasquarelli.
Smith made the Pro Bowl in 2006 and his seven sacks in 2007 led the Saints. He also was among team leaders in tackles with 66.
"We are excited about getting this long-term contract done with Will," said Saints general manager Mickey Loomis. "We view him as one of our core players and look forward to him having an impact on our defense for years to come."
Smith, who received about $20 million in bonuses when signed as a first-round draft choice out of Ohio State in 2004, was expected to earn between $1.8 million and $3 million next season, depending on performance incentives.
Smith had been dissatisfied with his contract -- which paled in comparison to the league's top defensive ends. Freeney is paid close to $12 million a year.
Last year, the Saints signed defensive end Charles Grant to a seven-year contract extension worth as much as $63 million if he reaches all incentives.
Smith has arguably outperformed Grant in recent years. He had 26 sacks over the past three seasons, compared to 11 for Grant.
"The Saints really stepped up," said Smith's agent, Joel Segal. "It was a long negotiation and a great deal for both Will and the Saints."
Smith skipped much of the Saints' offseason training program because of unhappiness with his contract, but participated in a mandatory minicamp and remained in New Orleans afterward. He also worked out with the team during its final two weeks of organized team activities, which are voluntary.
"He'll be able to show up for training camp now with nothing on his mind but getting ready for the season and the Super Bowl," Segal said.
Information from The Associated Press and ESPN.com's Len Pasquarelli was used in this report.