Smith, who led Aston Villa to the Premier League in 2019, was sacked as Norwich boss in December. He replaces Brendan Rodgers with Leicester 19th in the Premier League, two points from safety.
Shakespeare was part of the coaching team under Claudio Ranieri when Leicester won the Premier League title in 2016, and then took over as boss when the Italian was sacked the following year.
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Smith said: “I’m really happy to have the opportunity to lead the team during these final weeks of the season. The challenge in front of us is clear, but it’s one myself and my coaching team have experienced before and, with the quality in this squad and the number of games remaining, it’s very much achievable.
“Our first job is to rebuild confidence and instil belief in the team and I’m looking forward to getting to work with the players this week. Saturday will be a big test, but it’s the kind of occasion that reminds us all what it means to be a Premier League club, competing on the biggest stages against the best players in the world. I know we’ll be well supported by our travelling fans.
“We have to connect with that and give them a performance they can be proud of. We go there positive, looking for points.”
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