The German, who left his position as Bayern Munich general manager two years ago, is the frontrunner to be named the new football operations officer after holding talks with chief executive Graham Wallace.
The plan to overhaul Rangers' off-field structure was revealed in Wallace's business review in April.
And Smith, who was named director of football by Craig Whyte in 2011, reckons it is a step in the right direction.
He said: "There are benefits in bringing in someone like Christian Nerlinger at Rangers.
"We have an attitude against a director of football role in this country as it is more of a continental thing.
"I think if Christian has the background, a degree of knowledge and ideas to the role then why not? Nerlinger has been involved with a massive club before doing the same thing.
"Rangers are hopefully on the way up and it is maybe the kind of position that should be filled when they get back into the Premiership.
"If the club are thinking that they need a technical director then most clubs do benefit from having one on board provided they get along well with the manager.
"If Nerlinger does come into Rangers then he would be somebody that has been in this country and played for the club and that would be a good thing for Rangers.
"A technical director should never come in on a manager's say so. That person takes the club forward in another role.
"The manager has the first team to look after and he shouldn't hire the technical director."
McCoist was lukewarm about the prospect of a director of football being appointed when quizzed on the subject earlier this year. And, as revealed in SportTimes yesterday, he is set to hold crunch talks with Wallace over the move to hand Nerlinger the top Ibrox job.
But Smith insists the appointment can be made without the manager's backing.
He said: "A technical director can help the manager as I did during my time at Rangers.
"You advised the manager on players and which ones were available to have a look at. The decision always rested with the manager on whether those players were brought in or not. That is the way it should be.
"In Europe it is slightly different and technical directors bring players in. When I went to play in Switzerland I was brought in by a technical director and the manager didn't fancy me or want me.
"There has to be a relationship with the manager and tech director.
"If you get the right person in they will have a lot of contacts abroad finding players and stuff and they must know all about youth development and take a long-term view as opposed to a short-term fix.
"Managers tend to do short term because they need results."
McCoist will start putting his squad through their paces when the Gers return for pre-season training this week.
The Light Blues will be firm favourites for the Championship crown and former Ibrox star Smith has backed them to see off the Capital challenge.
He said: "I still think looking at the squads that Hibs have a lot of rebuilding to do.
"Hearts do not need to do too much as all those young players from last season are still at Tynecastle and they have been developing their squad.
"Hearts will be a major test for Rangers this season but the Ibrox side are more experienced in terms of personnel as most of the Light Blues players have played at the highest level.
"It's not as if the Rangers players are coming into a level that they cannot handle."