Smith has convinced head coach Robbie Deans that he deserves a starting place, having returned from Japan to back up the ACT Brumbies in Super Rugby after injury sidelined regular openside flanker David Pocock.
The Brumbies have risen to the top of the Australian conference and the influence of Smith, most notably at the breakdown, has been a big factor in that, noted Deans.
"He's class, isn't he? To have achieved what George has throughout his career, and return to play at the highest level after such a long break, is a testament to the quality of the man - both as a person and as a player."
Smith was part of the 2001 series win over the Lions and now boasts 110 Test appearances, six behind Nathan Sharpe and 29 behind Australia's most-capped player, his former Brumbies team-mate George Gregan.
Michael Hooper drops to the replacements bench with former Australia Under-20 captain Liam Gill squeezed out of the matchday squad.
"George's expertise in the contact zone, where timing, judgement and physicality is everything, is going to be critical," added Deans.
"Being able to call on him allows us to lighten the load on Michael while retaining the ability to inject him into what is sure to be a fast-paced and highly physical contest."
While Smith is the only change to the starting line-up from the second test, the Wallabies' expectations of some more demanding exchanges up front has been reflected in the make-up of the bench - they have reverted to a six forwards, two backs split.
Western Force back rower Ben McCalman is standing by for his first Test cap since 2011, with Rob Horne the player to make way, and scrum half Nick Phipps and uncapped full-back Jess Mogg are the back-line reserves.
Deans reckons the utility value within the starting back-line provides adequate positional cover for all but the most 'extreme' of circumstances.
AUSTRALIA Team & Replacements (v British & Irish Lions, 2013 British & Irish Lions Tour Third Test, ANZ Stadium, Sydney, Saturday, July 6, kick-off 8.05pm local time/11.05am Irish time):
15. Kurtley Beale (Melbourne Rebels)
14. Israel Folau (NSW Waratahs)
13. Adam Ashley-Cooper (NSW Waratahs)
12. Christian Leali'ifano (ACT Brumbies)
11. Joe Tomane (ACT Brumbies)
10. James O'Connor (Melbourne Rebels)
9. Will Genia (Queensland Reds)
1. Benn Robinson (NSW Waratahs)
2. Stephen Moore (ACT Brumbies)
3. Ben Alexander (ACT Brumbies)
4. Kane Douglas (NSW Waratahs)
5. James Horwill (Queensland Reds) (capt)
6. Ben Mowen (ACT Brumbies)
7. George Smith (ACT Brumbies)
8. Wycliff Palu (NSW Waratahs)
16. Saia Fainga'a (Queensland Reds)
17. James Slipper (Queensland Reds)
18. Sekope Kepu (NSW Waratahs)
19. Rob Simmons (Queensland Reds)
20. Ben McCalman (Western Force)
21. Michael Hooper (NSW Waratahs)
22. Nick Phipps (Melbourne Rebels)
23. Jesse Mogg (ACT Brumbies)