Smith, who lived from 1723-1790, is counted among the fathers of modern economics. He wrote "The Wealth of Nations," which touted the virtue of free markets.
Smith, who had already appeared on Scottish 50-pound notes, succeeds English composer Edward Elgar on the British 20-pound bill. There are still 1.3 billion of the notes in circulation bearing Elgar's likeness.
The new version is printed with a brighter purple ink, as well as improved security that includes color tags that show up under ultraviolet light and a larger silver hologram.
"We do not have a serious counterfeiting problem in this country, but because it is the most common note it is the one that has proved most attractive to counterfeiters," said Andrew Bailey, the Bank of England's chief cashier.