The 21-year-old has enjoyed a successful first season at Old Trafford since joining in the summer from Fulham and is relishing the prospect of taking on City at Wembley.
“The rivalry is more intense than it is down south," Smalling told reporters.
"There are a lot more clubs around London. Around Manchester you are either one or the other - and you need to choose wisely.
"I have really enjoyed it because I am right in the thick of it.
"Where I live, people either support City or United. I feel as though I have been dropped into a real rivalry."
Smalling has seen an incredible rise from non-league football to an England call-up in just a few seasons and says playing at Wembley is the pinnacle of any players career,
"It was brilliant for me to play in the last derby," he added.
"To play in a semi-final at Wembley would be a dream come true. Not many players get the chance to do it in their entire careers.
"To be involved in one at my age would be beyond my wildest imagination.
"I realise it might not happen but, bearing in mind, we have a midweek game in the league at Newcastle, it would be nice to play in one of those just to keep my run going."