The Gunners striker, who retired from international duty in February, has extended her stay at the WSL club.
Smith, in her third stint at the club, helped them to the FA Cup last season and the Continental Cup final.
Arsenal have bolstered their forward line in the winter by signing England striker Lianne Sanderson, Natalia Pablos Sanchon and young America youth international Chioma Ubogagu as Pedro Losa looks to mount an attack on the title in 2015.
Smith will also continue in her coaching role at the club.
When she ended her international career she said: "I'm at a different stage in my life now, I am focusing on coaching and working my way up to get my licences and stay involved in football that way, along with playing for Arsenal.
"Women's football has changed so much since I started playing and I am proud to have been a part of that. I'm pleased that I'll still be working in the game and with the FA in its activities moving forwards.
"I'd like to thank everyone who has supported me in my career, everyone at England and the FA, team-mates, coaches, friends and family.
"This year will be massive for the women's game with the World Cup coming up - there is a huge amount of talent in the England squad and I wish Mark and the team all the best for the tournament."
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