This paper proposes a new class of augmented musical instruments, “Smart Instruments”, which are characterized by embedded computational intelligence, bidirectional wireless connectivity, an embedded sound delivery system, and an onboard system for feedback to the player. Smart Instruments bring together separate strands of augmented instrument, networked music and Internet of Things technology, offering direct point-to-point communication between each other and other portable sensor-enabled devices, without need for a central mediator such as a laptop. This technological infrastructure enables an ecosystem of interoperable devices connecting performers as well as performers and audiences, which can support new performer-performer and audience-performer interactions. As an example of the Smart Instruments concept, this paper presents the Sensus Smart Guitar, a guitar augmented with sensors, onboard processing and wireless communication.