Smith, who quit W&K last October to return to her native Australia in December (a move she described as "a life decision rather than a career one") will take up the post of managing director from July.
She will spend two days a week with the agency until the birth of her second child, which is due in March.
She will inherit an agency going through a major restructuring process.
In January, TBWA announced that the founder of its Sydney operation had resigned and that the Melbourne and Sydney offices - which had operated as separate brands with different names - would be aligned.
Commenting on her decision, Smith said: "This is a fantastic opportunity for me. They want one offer in Australia and it will be about building a cohesive team and making the offices work together well. Tequila will be a huge part of that."
When Smith took over W&K in London as the managing director, the agency was struggling for survival. She joined in July 2000, from WCRS, and over the next three years built it into a credible London shop. The win of Honda's UK account in 2002 was a highlight, as was the creation of the car-maker's now famous "cog" spot.
Whybin TBWA is responsible for Nissan's advertising in Australia.