The Saddlers picked up twelve of a possible fifteen points at the beginning of the year including victories over AFC Bournemouth, Preston North End, Stevenage and a televised win over league strugglers Portsmouth.
Swindon Town boss Paulo Di Canio and Yeovil Town gaffer Gary Johnson were also nominated for the award.
Smith is first Saddlers manager to collect a Manager of the Month award since Richard Money in November 2006.