Merkley defeated Portland activist Steve Novick after months of a hard-fought race for the chance to take on Smith, whom Democrats see as politically vulnerable in the left-leaning state.
With 78 percent of the vote counted Tuesday, Merkley led Novick 46 percent to 41 percent, The (Portland) Oregonian reported.
Merkley was recruited to run for the nomination by the Democratic Senate Campaign Committee, The Hill reported.
Novick, who is 4 feet 9 inches tall and has a hook that serves as his left hand as the result of a birth defect, ran a series of television spots that poked fun at himself, saying he would "stand up for the little guy."
In the state's open House race, Republican businessman Mike Erickson beat former gubernatorial candidate and fellow Republican Kevin Mannix to face Democratic state Sen. Kurt Schrader.
The candidates are vying for the seat held by retiring Democratic Rep. Darlene Hooley.