Midfielder Smith, who has won 19 England caps, is currently at Newcastle United but the Leeds boss believes he can be tempted back to Elland Road, where he made his professional debut in 1998.
The 30-year-old, born in West Yorkshire, played 172 times for the club before moving to bitter rivals Manchester United in 2004 - when Leeds were relegated from the Premier League - in a £7million deal.
Elland Road favourite: Smith, 30, played 172 times for Leeds United before making a £7million move to Manchester United in 2004
Leeds currently sit fifth in the Championship, only five points off front-runners Queens Park Rangers. And Grayson believes that Smith, who come through the youth ranks at Leeds, would be a valuable addition to his squad.
A possible return for Smith has Leeds fans divided, although manager Grayson does not believe the Red Devils factor comes into the equation and that he will sign good players regardless.
However, he has admitted that he has not yet spoken to the Newcastle manager, Alan Pardew, about Smith, who played as a striker in his time at the club before being pushed back as his career developed.
Former favourites: Smith (left) and Woodgate (right) played over 250 games for Leeds - and they could make a return to Elland Road
'He's a good player and forget any affinity he has with the club in the past,' Grayson said of Smith, who made his international bow in 2001 in a friendly against Mexico.
'If you get a player of Alan Smith's ability then obviously you would have to be interested.
'We are in the market to make us better.
'No one knows if Alan Smith is available. Alan Pardew is the only one. I have not asked that question.'
Promotion push: Leeds manager Simon Grayson's side sit fifth in the Championship - and he believes that experienced players will help his side's chances of promotion
Smith is not the only ex-Leeds player on Grayson's radar, however, and he is also tracking former England centre-back Woodgate, who is currently at Tottenham.
He is hoping to take the injury-prone 30-year-old, who played over 100 games for Leeds, on loan and boost his club's chances of promotion from the Championship.
Spurs manager Harry Redknapp has said that he would be willing to lend Woodgate to a Championship side, as the defender needs games to rehabilitate himself after a long injury layoff.
He continued: 'We've been linked with many players. Smith is a good player, Woodgate is a good player and we want good players at this club.
'They have fantastic footballing ability, experience and know-how.
'Whether I intend to [sign them], we will have to wait and see.'
Yesterday Grayson was quoted in the Yorkshire Evening Post as saying: 'If Jonathan Woodgate or anyone else who's played in the Premier League will make us better then we'll try and sign them.
'I'm sure if any manager in the Championship or the Premier League was offered Jonathan Woodgate, they'd have to consider it.'
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Explore more:People: Simon Grayson, Jonathan Woodgate, Harry Redknapp, Alan Smith Places: Newcastle, Leeds, West Yorkshire, United Kingdom, Mexico