Smith agreed to a three-year deal with the club and will take over for interim head coach Marc Crawford, becoming the 14th bench boss in Senators history.
"D.J. Smith is a winner," general manager Pierre Dorion said in a statement. "We believe he is the best person to drive the development and success of the Ottawa Senators. D.J. is a great communicator and an exceptional strategist.
"His passionate approach, coupled with his ability to teach the game, is exactly what we were looking for throughout the process."
The Senators finished last and second-last in the NHL over the past two campaigns and will hope Smith can get the most out of the team's young core as the franchise continue to rebuild.
The 42-year-old served as head coach of the Oshawa Generals of the Ontario Hockey League from 2012-15, leading the team to a Memorial Cup championship in his final season. Smith also captured the Matt Leyden Trophy as the OHL Coach of the Year in 2014.
The Toronto Maple Leafs hired Smith in 2015 to serve as an assistant coach on Mike Babcock's staff.
The rumored candidates for the Senators' job included Smith, Hall of Fame goaltender Patrick Roy, Troy Mann, Rick Bowness, and Crawford.
The move marks the 23rd head coaching hire in the NHL since 2017, according to Sportsnet's David Amber.