Smith turned down the managerial role at Blackpool to remain in place at Wrexham for 2005–06. He signed goalkeeper Michael Ingham, defenders David Bayliss and Lee Roche, and strikers Lee McEvilly and Jonathan Walters, whilst blooding brothers Marc and Mike Williams. However, Wrexham struggled in the league, despite on loan striker Matt Derbyshire scoring 10 goals in 16 appearances. They finished the season 13th in League Two, having won only one of their last nine matches. The last match of the season was a 1–1 draw with former club Oxford, which hastened Oxford's relegation out of the Football League.