The move came as Agency chief executive Barbara Young was also tipped to leave the government-funded body.
Harman, who has chaired the Agency for eight of its 10 years’ existence, will stand down in June to make way for Smith, currently chairman of the Independent Advertising Standards Authority and a life peer.
Environment secretary Hilary Benn said: "This is a crucial time for the Agency, with the Pitt Review of the Summer 2007 floods due to be published in July and the ever increasing focus on protecting the environment and tackling climate change.
"Chris's strong leadership experience and his long-term commitment to the environment make him the ideal person to take the Agency forward in its role as environmental regulator, operator and advisor."
Benn also took time to praise Harman, saying that he had overseen the Agency's development into a modern and efficient regulator.
"He leaves it as a robust organisation that is willing and able to meet the challenges it faces in the years to come," added Benn.