The Smart UAV Program was motivated by a huge potential market, a various application and future core technologies. The Smart UAV system is defined as the advanced air vehicle with the smart technology such as collision awareness and avoidance, healthy monitering and self-recovering, intelligent active control. Due to the broad interest by government, industry and academia, Smart UAV development center and government steering committee were established. The organization of the Smart UAV program consists of domestic/international companies and academia. In this paper, the process and application of system engineering was introduced for Smart UAV development program.