Despite his experience in Vietnam, and his sense during the 1970s that the American public did not support the military, Smith remained in the Navy and rose through the ranks. By 1983, he was the Assistant Chief of Staff for Readiness, Naval Air Force, for the U.S. Atlantic Fleet, and by 1988 he was the Commander of the U.S. Navy's Carrier Group 6, based in Mayport, Florida.

From 1989 through 1991 (when he became a four-star Admiral), Smith was the Director of Operations, U.S. European Command J-3. Smith, the cold warrior, speaks of the deeply moving experience of witnessing the end of the cold war from the front lines of Germany. Smith became the key architect of the Navy's transformation for the post-cold war world. In 1992, he published From the Sea, an outline of the U.S. Navy's strategy for the 21st century. This new strategy focused on the increasing need for the Navy to support inland operations from shoreline waters, as opposed to preparing for deep-sea warfare against a Soviet navy.

Smith not only developed the blueprint for post-cold war naval operations, but became directly involved in the kind of warfare that typifies the post-cold war world: regional conflict. In 1994, he became the Commander in Chief, U.S. Navy Forces Europe and NATO Allied Forces Southern Europe. In this capacity, Smith led NATO operations in Bosnia. And it was there that this Vietnam attack pilot--who had carried out the futile limited bombing campaigns that marked that war--had to contend with a man who wanted to "bomb for peace:" Richard Holbrooke. Smith and Holbrooke repeatedly clashed over the scope and nature of NATO's military presence in Bosnia. Smith gave up the leadership of US Navy and NATO forces in Europe on July 31, 1996, retiring earlier than he had planned. NATO troops remained in Bosnia, led by Navy Vice-Admiral T. Joseph Lopez.