Invited to discuss a return to the job he filled between 2004 and 2007, the former Rangers boss contacted SFA chiefs last night to say he no longer wished to be considered.
Performance director Malky Mackay and ex-manager Alex McLeish, strongly backed by vice-president Rod Petrie, are now favourites to succeed Gordon Strachan as international gaffer.
SFA president Allan McRae contacted Smith at the start of the week to seek talks.
However, in the absence of a firm offer, the veteran ex-gaffer withdrew from the process.
After missing out on Northern Ireland’s Michael O’Neill, the sub-committee responsible for finding a new supremo are now working with a seven or eight-man shortlist and will report to the board on their findings next week.
Meanwhile, Partick Thistle managing director Ian Maxwell is the new frontrunner to become SFA chief executive following the resignation of Stewart Regan eight days ago.
Andrew McKinlay, who had been placed in interim charge, was last night named as the new head of Scottish Golf.
He will remain in temporary charge of the SFA until May.