Smith, 30, is an accomplished short game specialist having represented Sussex, Deccan Chargers, Mumbai Indians and his country at the Twenty20 level.
The Barbadian all-rounder will join the Scorchers following incredible batting performances in the 2013 Champions League where he was named Player of the Series, helping Mumbai Indians claim the title with 223 runs at an average of 55.75 and a strike rate of 142.94.
"We witnessed first-hand how destructive he can be as a top-order, opening batsman. Dwayne is a fantastic batsman, he's a brilliant fieldsman and can bowl some overs, so he's a great addition to the Scorchers," said Scorchers coach Justin Langer.
Smith joins South African Alfonso Thomas as Perth's two international players. His availability for the entire BBL, as well as his stunning form in the last year, has made him an attractive acquisition.
"He was very keen to get back to BBL so it was a pretty easy negotiation. He was high on the list because of the challenges you have with securing overseas players. It is almost impossible to get current players to play for the duration, which was one of the criteria. We could have got some of the England players but we would have got one of the one-day guys for three or four games," said Langer.
Smith has previously played T20 on Australian shores as a member of the New South Wales outfit in the 2009-10 BBL.
The Scorchers begin their campaign against Brisbane Heat at the Gabba Dec 22.
Perth Scorchers squad (one to be named): Simon Katich (captain), Ashton Agar, Michael Beer, Jason Behrendorff, Hilton Cartwright, Nathan Coulter-Nile, Pat Cummins, Liam Davis, Mitch Marsh, Shaun Marsh, Joel Paris, Dwayne Smith, Alfonso Thomas, Tom Triffitt, Ashton Turner, Adam Voges, Sam Whiteman.