The striker's future has yet to be resolved with both Hammers manager Sam Allardyce and the player himself admitting their uncertainty earlier this week.
However, the former Reds midfielder believes that Brendan Rodgers should bring the England international back to Anfield for next season
Smith wrote in his Liverpool Echo column: "I know there is talk of Carroll going back to Newcastle this summer but I really hope Rodgers holds on to him and gives him a chance.
"The past week has only strengthened my belief that letting Andy Carroll go to West Ham on loan this season was a mistake. On Wednesday night, Carroll was excellent against Manchester United at Upton Park.
"People say he doesn't fit into Rodgers's style but you need different [types of] players."
Carroll has netted six times for the London outfit this season.
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