Marsh has been ruled out of Australia's T20 World Cup opener against Ireland in Colombo after sustaining a direct hit to the box at training earlier this week.
Scans have revealed internal testicular bleeding, with Marsh requiring a period of rest and rehabilitation.
Cricket Australia said Marsh's return would be guided by "symptom resolution and medical advice".
"He is experiencing ongoing pain and discomfort, which is restricting his movement," CA said in a statement on Wednesday evening, just minutes before the toss for the Australia-Ireland clash.
In a dramatic turn of events, Smith has been rushed to Sri Lanka as cover for Marsh "to acclimatise and prepare, should he be required".
If Marsh is ruled out for the entire tournament, Smith will be parachuted into the main 15-man squad as his direct replacement.
Or, if Australia want to take the risk of having one less bowling option, Smith could come into the 15-man squad for Josh Hazlewood, who has already been ruled out with an achilles issue but is yet to be replaced.
Smith was controversially overlooked despite starring for the Sydney Sixers in the BBL, plundering 299 runs at an average of 59.8, including a sparkling century against the Sydney Thunder.
The 36-year-old hasn't played a T20 international in two years, but was keen to return to the fold for this year's World Cup and beyond.
It's likely Smith received the call-up while participating in LIV golf's pro-am in Adelaide on Wednesday.
If Marsh is ruled out for an extended period or the entire tournament, it would be a huge blow to Australia's hopes.
He is one of the most devastating white-ball players in the world, and was set to play a crucial opening role alongside Travis Head for the tournament.
After taking on Ireland on Wednesday, Australia face Zimbabwe on Friday, giving Marsh little time to recover in time for that match.
Master blaster Tim David was already ruled out of the opening match as he continues his recovery from a hamstring injury.
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