Leicester find themselves battling against relegation this term after their surprise title win in 2015-16, but Smalling is not taking Claudio Ranieri's men lightly.
"Yes, I am surprised with where Leicester are right now," Smalling told the official United website ahead of Sunday's encounter.
"And I think a lot of people are. Whether they were going to be challenging for the title again or not, I would expect them to be higher than they are.
"But I do not think we can forget their qualities which made them the champions, the current champions, so I think we need to be more wary of their potential threats and what they did last year rather than the situation they find themselves in now."
Jamie Vardy remains Leicester's main attacking threat, even if the England international has found it hard to replicate last year's form as well, and Smalling has acknowledged the striker can cause him trouble.
"Whether or not Jamie is on a roll of scoring however many goals last season, I think he is someone who will always give his all for the team and no matter their situation or how many goals he has scored, he will not let it rest," Smalling added.
"You know that when you have got the ball, you will have a few seconds less than you would in the majority of games."