"There are one or two celebrations in the dressing room and deservedly so."
Smith's side now face Serie A club Fiorentina, who followed up their win over Everton with victory over PSV.
But the manager says they have nothing to fear.
"They have gained in confidence over the season. It's not often we have to play 16 European games and it will be 18 now," said Smith.
"They have not only gained a togetherness as a team but also a confidence that they can compete against decent sides. Personally, I'm delighted for them - they are a great bunch to work with."
The only negative of Rangers' night in Lisbon was the bookings of captain Barry Ferguson and fellow midfielder Kevin Thomson, who will be suspended for the first leg of the semi-final against Fiorentina at Ibrox on 24 April.
"We will miss Barry and Kevin, but it's something you expect and you are bound to get a booking or two," said Smith.
"We have a problem with fixtures, but I thought we played very well tonight.
"There's a terrific determination among the squad and there was a great deal of skill on show tonight. I was really pleased in the manner of how we played."
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