Fine-resolution Light Detection and Ranging (LiDAR) data often exhibit excessive surface roughness that can hinder the characterization of topographic shape and the modeling of near-surface flow processes. Digital elevation model (DEM) smoothing methods, commonly low-pass filters, are sometimes applied to LiDAR data to subdue the roughness. These techniques can negatively impact the representation of topographic features, most notably drainage features, such as headwater streams. This paper presents the feature-preserving DEM smoothing (FPDEMS) method, which modifies surface normals to smooth the topographic surface in a similar manner to approaches that were originally designed for de-noising three-dimensional (3D) meshes. The FPDEMS method has been optimized for application with raster DEM data. The method was compared with several low-pass filters while using a 0.5-m resolution LiDAR DEM of an agricultural area in southwestern Ontario, Canada. The findings demonstrated that the technique was better at removing roughness, when compared with mean, median, and Gaussian filters, while also preserving sharp breaks-in-slope and retaining the topographic complexity at broader scales. Optimal smoothing occurred with kernel sizes of 11–21 grid cells, threshold angles of 10°–20°, and 3–15 elevation-update iterations. These parameter settings allowed for the effective reduction in roughness and DEM noise and the retention of terrace scarps, channel banks, gullies, and headwater streams.