The Northern Ireland Under-21 international becomes the U’s second signing on transfer deadline day, following Marcus Browne’s transfer from Middlesbrough.
Box-to-box midfielder Smyth joins Dungannon Swifts on a three-and-a-half-year deal.
The U have reportedly fended off competition from several clubs to sign him, with National League big spenders Vanarama Wrexham believed to be interested.
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But United’s record with players coming from Northern Ireland has swayed him for the 21-year-old, who follows in the footsteps of Gavin Whyte, Mark Sykes and Joel Cooper.
Smyth said: “As soon as I heard Oxford was interested, he was the one that stood out for me.
“The way they are performing in the league at the minute and (the prospect of) Championship football next year is obviously attractive.
“With the guys coming from across the water with the same path as me, that was a factor I took into consideration.
“It’s not just the players who come, it’s the players who arrive and do very well.
“You’ve seen it with Gavin in particular, stepping onto the international stage.
“He (the club) has a growing reputation with us.”
The midfielder completed his medical at United earlier this afternoon so he is unavailable for tomorrow’s trip to Wigan Athletic in Sky Bet League One.
Smyth was 18 when he first got a taste of senior football with Swifts and has since become a regular.
He was made captain last year, when he also made his Northern Ireland Under-21 debut against Scotland in June.
Smyth became the second player in his family to represent his country, with uncle Pat McGibbon capped by the senior team in the 1990s.
It’s his first move away from home as the youngster transitions from part-time to full-time football.
Also read: Marcus Browne returns to Oxford United on a permanent deal
He said: “It will be something that I am not 100% used to.
“Being on the international scene has helped me break through, but I will have to adapt quickly.
“I have a good footballing family with my uncle Pat living in England.
“My dad and grandfather have always been there for me too, so I know who to trust.
“We have good people in the club and they will help guide me in the right direction.”