Both players are the subject of speculation as the transfer window heats up but Smith, who signed both for the club five years ago, hopes they are going nowhere.
Smith believes Watkins in particular is “irreplaceable” with the striker having finished top of the scoring charts in each of his five seasons at Villa Park.
The 29-year-old overtook Gabriel Agbonlahor as Villa’s all-time Premier League top scorer in May.
Asked about Watkins and Martinez during an interview with the Daily Mail, Smith said: “Villa don’t want to lose either of them and I don’t think they can.
“(Ollie) is another top lad that I keep in touch with and now Villa’s Premier League top scorer. I think he’s irreplaceable.”
Martinez sparked talk over his future when he left the field in tears following the final home match of the season.
But Villa are yet to receive an approach for the World Cup winner and while Atletico Madrid and Manchester United are keeping tabs on his situation, any move will depend on them offloading their current goalkeepers first.
Watkins, meanwhile, was the subject of an approach from Arsenal in January but the Gunners failed to match Villa’s £60million valuation.
Any chance of the England international leaving in that window ended when Jhon Duran was instead sold to Al-Nassr in a deal which could eventually be worth more than £70m.
Arsenal are again thought to have Watkins on their list of potential targets this summer but they are currently prioritising a move for RB Leipzig striker Benjamin Sesko.
Smith, who was sacked by Villa in November 2021, is currently in charge of Charlotte FC in the MLS. The 54-year-old is delighted to see so many of the players he signed still making an impact for Villa at the top level.
“It gives me great pride. Seeing all those guys I worked with improve, get opportunities, earn more money and ultimately play better,’ he said.
“I remember telling Ezri (Konsa) when I left that he’s got 18 months to get in the England squad or else I’m allowed a free punch and he texted me back when he got in the squad.
“But it’s great to see what Unai (Emery) has done. And it’s what I expected with the ownership because Nassef (Sawiris) and Wes (Edens) were really intent on their five year plan of getting to Europe.”