The Pistons intended to make a splash in free agency and targeted Smith from the first moments of free agency this week.
Smith looked at several other options in free agency, as did the Pistons before coming to terms. His signing won't become official until Wednesday.
As of now, the Pistons are not involved in a sign-and-trade with the Hawks, whom Smith is leaving after nine seasons, sources said.
Smith averaged 17.5 points, 8.4 rebounds and 3.8 assists for the Hawks last season.
The Pistons fired coach Lawrence Frank in April, a day after they finished 29-53, and hired Maurice Cheeks in the hopes that he could help end the franchise's four-year postseason drought.
Better players, of course, will help Detroit win more than any coach can from the sideline. At a steep cost, Smith seems to upgrade the team's collection of talent immediately.
Detroit likely will start the 27-year-old Smith in its frontcourt with 23-year-old power forward Greg Monroe and center Andre Drummond, who will turn 20 next month. Barring another major move this offseason, the backcourt will include point guard Brandon Knight and perhaps shooting guard Kentavious Caldwell-Pope, the No. 8 overall pick in last month's draft.
The Pistons went into the offseason with more than $20 million in cap space, and desperately need to take advantage of the financial flexibility unlike the last time they had a lot of money to spend in the summer.
Detroit signed Ben Gordon and Charlie Villanueva to a $55 million, five-year contract and $35 million, five-year deal, respectively, in 2009 and both failed to provide a positive return. The Pistons ended up trading Gordon last summer to Charlotte for a first-round pick and Corey Maggette to cut about $15 million in salary. Detroit could still deal Villanueva, who is entering the last year of his deal, to a team that might want to take on his expiring contract.
Information from ESPNLosAngeles.com's Ramona Shelburne and The Associated Press was used in this report.