Smith will join quarterback Jim Kelly, whose No. 12 was retired in 2001, as the only Bills players whose jersey numbers have been officially retired by the team.
"I was a little numb. I was in somewhat of I would say, disbelief,'' Smith said during a conference call. "This will be a celebration for the fans, the Buffalo Bills organization and the NFL.''
Smith grew emotional in noting how he was informed of the honor a day after Mother's Day, knowing what this would have meant to his mother, Annie Lee, who died two years ago.
"Every Mother's Day it kind of gets to me,'' he said. "I know she's watching from afar, and she's one of those angels that continues to pray for me. So I'm very blessed.''
The Bills have not issued No. 78 to any player since Smith's final season with the team in 1999.
"On behalf of Terry and Kim Pegula and the entire Bills organization, we feel this is a tremendous opportunity to honor Bruce and his Hall of Fame career," Bills president Russ Brandon said in a statement. "We believe it's going to be a great night for Bruce, his family and Bills fans everywhere."
Brandon said the case could be made of Smith being regarded as the NFL's greatest player. He added that the plan to retiring Smith's number was on his to-do list, and prompted by the Pegulas, who purchased the franchise from the estate of late Hall of Fame owner Ralph Wilson in 2014.
Smith, 52, played 15 seasons (1985-99) with the Bills and four seasons (2000-03) with the Washington Redskins. His 200 career sacks remain the most in NFL history.
The first overall selection of the 1985 draft, Smith was an 11-time Pro Bowler and two-time Associated Press NFL Defensive Player of the Year. He was elected to the Pro Football Hall of Fame in his first year of eligibility in 2009.
The Associated Press contributed to this report.