The rock legend, known as the 'Godmother of Punk', is one of 18 acts due to play at Rome's Conciliation Auditorium on 13 December. The concert will be broadcast live on television.
Smith's work often involves Catholic imagery and she met and shook hands with the "very interesting" Pope in St Peter's Square last spring.
She recorded the lullaby for Darren Aronofsky's controversial biblical remake Noah and has spoken about how the Bible is "very resonant" today.
"It has everything – creation, betrayal, lust, poetry, prophecy, sacrifice," Smith told The Independent. "It doesn't really matter what religion you are or if you have no religion, those stories are still relevant to what people go through in their lives and they're also beautifully written passages."
Interestingly, and somewhat amusingly, a historic church in Naples had been debating whether or not to allow Smith to play at their concert, Italian newspaper Corriere del Mezzogiorno reports.
Catholic association Portosalvo had asked the Archbishop of Naples to ban the "Because The Night" singer on grounds of "blasphemy", but their request now looks unlikely to be granted.
Other stars lined-up to perform at the Vatican include French DJ Bob Sinclar, singing nun Sister Cristina Scuccia, who won Italy's version of The Voice and covered Madonna's "Like A Virgin" for her first single.
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