In his first year at QPR, Smith took the club to the League Cup final, where they lost 3–0 to his former club Oxford United. Smith continued to manage QPR until December 1988 when he left to become manager of Newcastle United. Newcastle finished bottom of the First Division in 1989; they came close to making an immediate return, finishing third in the league but losing 2–0 in the playoff semi-final to local rivals Sunderland at St James' Park. With no prospect of promotion by March 1991, Smith resigned amid a boardroom power struggle at the club.