Smith, the former shadow work and pensions secretary, has long been rumoured as a potential challenger to Jeremy Corbyn, alongside the former shadow business secretary Angela Eagle.
However, Smith has now said that while he stands ready to do anything to serve Labour, talks between the party and its union backers should continue.
After speaking with Unite general secretary Len McCluskey, Smith said: “On behalf of the trades unions, Len has reassured me that the talks he has opened up between Jeremy and Tom Watson have been productive and has asked that they are given more time this weekend to see what further progress can be made towards a resolution.”
And the Pontypridd MP also warned against a “disastrous” split in the party, forecast by some if Corbyn manages to hold on to the leadership.
“I believe that all of us whose priority is to restore unity in the Labour movement and give us a chance to defeat our only true enemy, the Tories, should give these talks every chance to succeed,” Smith said.
“That is what I intend to do and I urge all my colleagues to do likewise.”
It comes after almost a fortnight of crisis within the party, featuring more than 60 resignations from the party's shadow cabinet members, front benchers and parliamentary aides.
Since then, Corbyn has also overwhelmingly lost a vote of confidence among his MPs, but the Labour leader has remained resolute, issuing a video statement to stress his commitment just two days ago.