A well-place source told Sportal the 111-Test veteran has activated a get-out clause in his contract with Lyon after the French club was relegated from the Top 14 competition.
The 34-year-old is set to link with the London club for the 2015-16 campaign on what is believed to be a one-year deal.
Smith, who last played for the Wallabies against the British and Irish Lions in 2013, is yet to confirm his availability for the national side in the 2015 Rugby World Cup.
He is eligible for selection in Michael Cheika's squad after the Australian Rugby Union relaxed the eligibility rules for overseas-based players.
The veteran faces an uphill battle to oust incumbent Australia skipper Michael Hooper and former captain David Pocock from the squad, but his experience would be a massive boost for sixth-ranked Wallabies.
Smith's other previous clubs include the Brumbies, Suntory Sungoliath, Toulon and Stade Francais.