The Celtics needed Smart's heroics after the Knicks reeled off eight straight points to knot the score at 112-112 with 66 seconds left.
Al Horford found Smart for the key basket for the Celtics, who had appeared to be cruising toward a fifth win in six games when they held leads of 109-96 with 4:58 remaining and 112-104 with two minutes left to play.
But after the Knicks reeled off eight straight points to knot the score at 112-112 with 66 seconds left, the Celtics needed Smart's heroics.
A basket by Carmelo Anthony forced the Celtics to call their final full timeout, and coming out of the stoppage, Jae Crowder was guarded by New York's Kristaps Porzingis on the inbounds pass.
Three other players touched the ball before it wound up in Smart's hands on the left side near the Celtics bench after Horford passed it out of the post.
"I was going for the shot," Horford said. "It kind of was one of those things that I saw him there and you feel the defense out there sometimes. So it's just about making the right, easy play. I hit him and he hit a huge shot."
Smart had enough time to set his feet and drain the uncontested three.
"He drew multiple defenders and kicked it out. I know most teams are going to leave me open," said Smart, who has connected on 27.9 percent of his three-point attempts this season. "I got an opportunity to knock down a big shot for my team."
On New York's next possession, a closely guarded Anthony was unable to get a three-pointer to drop. The Knicks seized the rebound, but Avery Bradley stripped Anthony of the ball with 18.8 seconds left.
"We fought our way back and stayed in the game defensively," Anthony said. "That big three by Marcus Smart gave them confidence to finish the game."
Isaiah Thomas led the Celtics with 27 points while Crowder and Kelly Olynyk added 16 apiece. Horford and Smart contributed 15 points each for Boston, who never trailed after the 5:14 mark of the second quarter.
Anthony led the Knicks with 29 points but connected on just nine of 24 from the floor.
Derrick Rose added 25 and Porzingis chipped in 22 for the Knicks, who dropped their fourth straight Christmas Day game.