The Red State director is planning to make Hit Somebody his last project before retirement.
Hit Somebody centres on the world of ice hockey, following the story of day-dreaming Buddy who fantasises about scoring a goal in the National Hockey League, The Hour reports.
The first instalment will depict his childhood, and the second will see him as a major hockey player.
Smith has already cast Nicholas Braun in the first film. The young actor will next be seen in Smith's Red State, alongside rumoured Hit Somebody co-star Melissa Leo.
John Goodman and Colin Hanks are also reportedly interested in roles in the two-parter, which was also pitched as a television series.
The title of the film comes from a song by Warren Zevon about a Canadian teenager who wants to be a hockey star despite being not "that good with a puck".
Smith's Red State comes out in UK cinemas on September 30 and in US cinemas on October 19.
Watch the red band trailer for Red State below: