The term smart materials refers to a class of materials that are highly responsive and have the inherent capability to sense and react according to changes in the environment. The common characteristic of all smart materials is the ability to react mechanically to external stimuli. These materials have been developed to work smarter and more efficiently than their predecessors.

Today's smart materials largely respond in one of two ways - either electrostrictively or magnetostrictively. These terms basically identify how they are told to move, either electrically or magnetically, respectively. Other smart materials, such as Shape Memory alloys, react to changes in temperature.

Early smart material applications started with magnetostrictive technologies. This involved the use of nickel as a sonar source during World War I to find German U-boats by Allied forces. Although limited by its power density and strain capabilities, nickel is still used today in cleaning baths at ultrasonic (above the range of human hearing range) frequencies.

Piezoceramics, the other main type of smart materials, were initially discovered by Pierre and Jacques Curie. They identified the response that crystals of sugar and Rochelle salt made when subjected to mechanical stress. This development in 1880 began the work in what is now a $600 million dollar industry today. Their initial success, and the corresponding converse effect of strain production by the application of an applied electric field, led the way to the first serious applications of piezoceramic materials, which began during World War I. In addition to nickel sonar transducers, work began in France on the development of an ultrasonic submarine detector that would emit a high frequency "chirp" and measure depth by timing the return echo. The success of sonar then stimulated intense research and development into a variety of piezoelectric formulations and shapes.

However, piezoceramic materials do have limitations - namely fatigue and aging. Therefore, in the 1960's, the Naval Ordnance Laboratory began work on new materials that would be able to send out stronger sonar signals. By this time, considerable work had been done by the Ames Laboratory in rare earth separation and processing to prepare high purity rare earth metals. This led to an alliance between the Naval Ordnance Laboratory and Ames Laboratory, which developed a processing technique to produce these "giant magnetostrictive" materials in research quantities. This feat, and subsequent patent activity, led to the birth of Terfenol-D.