Smith showed incredible reflexes to dive low to his right and pluck one of most astonishing catches of his 95-Test career, in a series where he has spilled a few that he would be expected to take.
"It was massive," Lyon said. "To be honest with you, and this is no disrespect to anyone else in the team, but I don't think anyone else is catching it. That's just me bowling from one end and looking up and seeing Steve Smith at slip or leg slip and having that confidence as a bowler.
"Yes, he has dropped a couple here and there, but I wouldn't trade him for anyone. It shows the quality of cricketer he is that we see at training the different methods he is coming up with to try and get better and try and improve. This is someone who has played 95 Test matches.
"Hats off to Smithy, he did all the work, I'm not surprised but it was a massive moment to finish off the day strongly."
"I have obviously played a lot with Smithy throughout my career, so we are very good mates on and off the field and are able to have some very good cricket conversations," Lyon said. "He is one of the best batters in the world, especially over the last decade, the way his brain works with cricket tactics provides me with good conversations.
"But saying that I thought Pat skippered the game really well last week. We had really good plans under both of them and that's where Australian cricket is in good hands with one of the best bowlers in the world and one of the best batters in the world being our two leaders."
Khawaja, who is Australia's leading run-scorer, allayed concerns over his fitness with the acrobatic take to remove Iyer after he had spent the initial stages of India's second innings off the field nursing a back complaint.