In this study, based on human knee's kinetics, a smart prosthetic knee employing springs, DC motor and magnetorheological (MR) damper is designed. The MR damper is coupled in series with the springs that are mounted in parallel with the DC motor. The working principle of the prosthesis during level-ground walking is presented. During stance phase, the MR damper is powered on. The springs will store and release the negative mechanical energy for restoring the function of human knee joint. In swing phase, the MR damper is powered off for disengaging the springs. In this phase, the work of knee joint is negative. For improving the system energy efficiency, the DC motor will work as a power generator to supply required damping torque and harvest electrical energy. Finally, the design of MR damper is introduced.