A committee headed by Mark O'Connor presented the award to the 12-year-old bluegrass and Americana fiddler at his Strings Conference in San Diego, California on July 27.
The violin was made by Jonathan Cooper of Maine in memory of Daniel Pearl, the Wall Street Journal reported murdered in 2002.
Pearl was an accomplished violinist and ardent music lover who had dreams of becoming a violinist before studying at Stanford University. He later played in fiddle bands, once leading an Atlanta-based group that opened for the The Kinks in 1993, and performed Bach at his wedding.
"He was always a music man," the Journal proclaimed on the day after his death was announced.
The award, established in 2003, is given annually to two rising young musicians, and grants its recipients use of Cooper's specially made violin for one year.
"By passing the instrument through so many hands and playing past musical borders, we hope that the beautiful sound of these violins will help inspire listeners to live in harmony, on a peaceful planet," says the luthier on his website.
Smith, who plans on giving many concerts on the Pearl Violin, is in the midst of a burgeoning career.
At age 10, she became the youngest fiddler invited to perform at the Grand Ole Opry. Some prominent bluegrass musicians with whom she has collaborated include Jim Brock, Carl Jackson, Jesse McReynolds, James Monroe, Snider, Marty Stuart and Rhonda Vincent.
"I am speechless. I can only hope I can give through my music a little of what Daniel Pearl gave through his life," said Smith on receiving the award.
"This year will be a great opportunity to be a part of something much bigger than I am."