The Bills announced Wednesday that Smith's jersey number will be retired at halftime of the Bills' Week 2 game on Thursday night, Sept. 15.
The 52-year-old Smith will join quarterback Jim Kelly as the only other player in Bills franchise history with his number retired. Kelly's No. 12 was retired in 2001.
The Bills have not issued No. 78 to any player since Smith's final season with the team in 1999.
"On behalf of Terry and Kim Pegula and the entire Bills organization, we feel this is a tremendous opportunity to honor Bruce and his Hall of Fame career," Bills president Russ Brandon said in a statement. "We believe it's going to be a great night for Bruce, his family and Bills fans everywhere."
Smith is the NFL's all-time leader with 200 career sacks. He played 15 seasons (1985-99) with the Bills and four seasons (2000-03) with the Washington Redskins.
"I'm humbled beyond words," Smith said Wednesday during a conference call with reporters. "Where this fits I think is right at the top with being inducted into the Hall of Fame. I'm very grateful and thankful.
"Russ Brandon and I had a number of conversations and I think a month ago he informed me this was going to happen. Thank you to the Pegulas because they have reached back into the rich history of the Buffalo Bills and they're making a concerted effort when it comes to recognizing that rich history. It's why they were an excellent fit to become the next owners of the Buffalo Bills."
Smith, the first overall selection of the 1985 draft, was an 11-time Pro Bowler and two-time NFL Defensive Player of the Year. He was inducted into the Pro Football Hall of Fame in 2009.
"Bruce Smith was 100 percent football player," Kelly said of his former teammate. "He was one of those guys when people talk about being the best, 'I want to be the best. I want to do this. I want to do that.' Bruce Smith was all about wanting to be the best possible football player he could be. He wanted to be the best that ever played, and pretty much, as I look at it, even though he was a teammate of mine, I think he definitely is one of the best defensive ends ever to play the game."