The deal sees misfiring Boro striker Kris Boyd move in the opposite direction to the City Ground.
With Jason Steele and Danny Coyne both injured, Boro boss Tony Mowbray spent all weekend desperately trying to sign an experienced keeper ahead of tonight's game with Derby.
He all but admitted defeat yesterday evening, but early discussions this morning paved the way for Smith's arrival.
The keeper, who will wear the number 13 shirt, will go straight into the squad for tonight's relegation battle with the Rams.
Smith, 31, has not made a senior appearance since last May, but boasts more than 120 career appearances for Forest.
Mowbray said: "Smith has plenty of experience at this level and he has played in the Premier League too.
"We clearly needed a goalkeeper, and he brings us experience and a steady pair of hands."
Boyd's departure is hardly a surprise given Mowbray's reluctance to play the former Rangers striker, who was signed amid much fanfare by Gordon Strachan last summer. It is likely that Boro are continuing to pay a significant proportion of Boyd's wages, which are understood to be more than £30,000-a-week.
Mowbray added: "It's a good deal for the club and it's a good deal for the player who will hopefully get some game time and build his confidence back up."