The former Rangers skipper admits the first thing he should have done when returning to Murray Park following his eventful international break in April was to approach Smith.
The Ibrox manager had told Ferguson to keep a low profile after a lengthy drinking session cost him his place in Scotland's World Cup qualifier against Iceland.
Instead, Ferguson and team-mate Allan McGregor made inappropriate gestures at photographers on the Hampden bench.
Ferguson, who insists the gestures were not premeditated, then failed to apologise to Smith until he was summoned to the manager's office.
The 31-year-old was fined, suspended and stripped of the Rangers captaincy before being sold to Birmingham this summer.
But he feels letting down the manager who launched his career was his gravest error.
"My head was messed up big time when I drove into Murray Park," Ferguson told the Herald.
"I should maybe have pulled the car over and took 10 minutes to think about what I was going to say to the manager.
"But I parked as usual, and just headed for the dressing room.
That was probably the biggest mistake I've made in my life.
"Walter Smith is a man I have massive respect for, and still do. He has been the biggest influence on my life and my career.
"He took me as a raw kid at Rangers and to play under him for any player - and they'll all tell you this - is fantastic as he knows exactly how to treat players.
"So to let him down by not giving him the respect of knocking his door and apologising for what I'd done was shocking on my part.
"He called me in, he was clearly very angry - I knew then I had made a bad situation even worse. Reflecting on the whole thing now, I would love to change that morning. The manager deserved better from me."
Ferguson claimed anger was the main factor behind his "shameful" behaviour at Hampden, which led to the Scottish Football Association telling him he would no longer play for his country.
"It was just rage," the midfielder added. "Maybe at myself, maybe at what was going on.
"I wanted to do something as I am an aggressive kind of guy. I should have done something else to try and open the release valve.
"I strayed back to my younger days that night, when I was prone to doing daft things.
"People have asked me what I was thinking about. I think some seemed to believe they knew for a fact we had planned it.
"The V-signs were never planned. I sat there, the whole thing just burst in my head and I did it.
"I just flipped. There were maybe 40 photographers pointing at me and I just did it.
"Allan and I had never spoken about making any gestures, it wasn't premeditated. I think he looked at me and did the same, it was just a huge error of judgement."