He has been with the club since 2000 when he joined Edinburgh Reivers. Craig has played 125 games for Edinburgh and has seven caps for Scotland.
Smith said: "I am looking forward to next season. Hopefully we can build on what we have achieved this season. As a squad we have improved and hopefully we can keep going forward and aim for a higher finish in the Celtic League and have another competitive year in Europe. I would like to thank my agent Shaun Longstaff for his efforts."
Frank Hadden, Edinburgh Rugby head coach, said: "It is great to re-sign Craig. He is an outstanding rugby player and he has made significant progress in the scrum. There is no doubt that at 26 years of age his best is yet to come."
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