Colman will portray the narrator with Smith voicing the hero, Superworm. The half-hour special will air Christmas day on BBC One and BBC iPlayer.
Patricia Allison (Sex Education) and Rob Brydon (Gavin & Stacey) have also joined the voice cast as Butterfly and Crow, respectively.
Superworm follows the titular hero who is described as super-long and super-strong. Superworm helps out his fellow animals and insects but is kidnapped by the wicked Wizard Lizard and his sidekick Crow, causing Butterfly to come to the rescue.
Sarah Scrimgeour and Jac Jamman are directing based off a script by Max Lang and Suzanne Lang.
"This is such a lovely project to be involved with. When reading the script, and imagining all those goings on at the end of the garden, I could really get a feel for the pure fun and joy that the film will bring. I've always loved these charming productions at Christmas and I'm delighted to be voicing the narrator," Colman said in a statement.
Smith said, "I'm delighted to play the part of Superworm. And join such a fabulous cast of actors, artists and storytellers. What fun to be part of the BBC's Christmas line up in this great children's tale."
Superworm, from Magic Light Pictures, is BBC's ninth adaptation of a Donaldson and Scheffler book. BBC aired Zog and the Flying Doctors last year.