The club, which has already been relegated from the Top 14, is looking to bounce back into the top flight and has strengthened its playing staff for next season with the signing of international stars Sebastien Chabal and Lionel Nallet.
Smith played for Watsonians before signing a professional contract with Glasgow Caledonia. He then spent two seasons in French rugby with Brive and moved to Northampton Saints where he ended a playing career that saw him capped 61 times for Scotland and make six appearances for the British & Irish Lions.
Smith, who was appointed to his Edinburgh post by Rob Moffat, is understood to have met Lyon officials last Thursday on a rest day before Edinburgh’s Heineken Cup semi-final.
It is claimed that an agreement in principle has been reached and that the French outfit will offer him a two-year deal as assistant to head coach Xavier Sadourny.
Edinburgh play their final match of the season tomorrow evening when they host Benetton Treviso on RaboDirect PRO12 duty.