Hansen had been expected to recall first choice Smith for the clash at King's Park, despite TJ Perenara's performance last week against Argentina.
However, Smith was suspended for one game and is due to be sent home after admitting to going into a disabled toilet with a woman at Christchurch Airport two weeks ago while with the team.
The scandal dominated Thursday's media in rugby-mad New Zealand, with Fairfax Media hosting an online Q&A session with a clinical psychologist and employment lawyer, while Prime Minister John Key also weighed into the controversy.
Australia hold on to beat South Africa as All Blacks overcome Argentina
"I suspect he'll be sitting back, reflecting on the fact he's let himself down, he's let the team down ... and frankly, he's embarrassed himself a bit," Key told reporters.
World Cup winner Smith has been a regular for the All Blacks in the last three seasons and has earned 54 caps since making his debut in 2012.
Smith's absence means Perenara keeps his spot with Tawera Kerr-Barlow on the bench.
Israel Dagg - All Blacks v Australia, Bledisloe Cup
Image credit: Reuters
The All Blacks have already wrapped up the Championship after five successive bonus-point victories and other than the Smith omission Hansen's selections were as expected, with Jerome Kaino and Waisake Naholo returning from injury.
Flanker Kaino missed last week's game in Buenos Aires with a shoulder injury and only joined the side in Durban, while winger Naholo injured his hamstring in the opening match of the southern hemisphere championship.
Centre George Moala has also returned to the replacements bench after suffering a knee injury ahead of that opening clash with Australia in Sydney.
Openside flanker Matt Todd, brought in as injury replacement for Sam Cane, has been given the start against the Springboks ahead of Ardie Savea, who has dropped to the bench.
Liam Squire, who started in Kaino's place last week against the Pumas has dropped into the replacements as Hansen opted for two loose forwards instead of a specialist cover at lock, indicating he expected the team to play at a high tempo throughout.
Lock Patrick Tuipulotu, who impressed last week in a rare start, has dropped out of the squad altogether with Sam Whitelock resuming his second row partnership with Brodie Retallick.
All Blacks Squad v South Africa
Team: 15-Ben Smith, 14-Israel Dagg, 13-Anton Lienert-Brown, 12-Ryan Crotty, 11-Waisake Naholo, 10-Beauden Barrett, 9-TJ Perenara, 8-Kieran Read (captain), 7-Matt Todd, 6-Jerome Kaino, 5-Sam Whitelock, 4-Brodie Retallick, 3-Owen Franks, 2-Dane Coles, 1-Joe Moody.
Replacements: 16-Codie Taylor, 17-Wyatt Crockett, 18-Charlie Faumuina, 19-Liam Squire, 20-Ardie Savea, 21-Tawera Kerr-Barlow, 22-Lima Sopoaga, 23-George Moala
All Blacks set for wholesale changes against Springboks
Australia strike early to down Argentina in Perth