The actor - who starred as youngest child Mark Taylor in Home Improvement for eight years - was arrested at around 1am local time in Los Angeles County, according to TMZ.
Police told reporters that he was found to be under the influence of marijuana, while hash was also found inside his car.
The 27-year-old was reportedly discovered in his 1998 silver Honda Accord parked at an angle in front of a fire hydrant.
Smith sued his parents in 2001, claiming that they were misusing his trust money funds that he earned as a child.
Watch a scene featuring Taran Noah Smith in Home Improvement below: