The smart road stud (SRS) system can improve the driver’s overtaking behavior through light guidance, which shows great potential in raising the traffic efficiency of two-way two-lane roads (TWTL). In this paper, we propose a light guidance system based on SRS and a combination of driving simulator and microscopic traffic simulation methodologies for evaluating the effect of smart road studs on a TWTL traffic flow. The driving simulation results reveal that SRSs do not only drastically alter microscopic driving characteristics but also it significantly influences drivers’ decision-making process for overtaking. The frequency of overtaking with SRS escalated by 114.58% compared to that without, with the key differential in overtaking decision patterns manifesting predominantly in the selection of distance between oncoming vehicles traveling in the opposite direction. Microsimulation results demonstrate that the implementation of a smart stud system can enhance both the safety and traffic efficiency on the TWTL roadway with limited sight.