(FORTUNE Small Business) - Josh Smith doesn't seem like a cutting-edge guy--he wears cowboy hats and works in Frenchtown, Mont. (pop. 883), in a shop he built himself. But when it comes to crafting custom-made collectible knives, he is regarded as one of the world's most progressive talents. Smith, now 25, made his first knife at 11. (His Little League coach, a knife aficionado, taught him the trade.) At 19, he became the youngest craftsman to earn a Mastersmith ranking from the American Bladesmith Society.

Stan Dahlin, 50, a chiropractor who owns a practice in Hilmar, Calif., has been collecting knives for the past 20 years and owns a Josh Smith knife with a desert ironwood handle. He just ordered a push dagger (a smaller knife with a handle that fits in the palm of one's hand) for his wife, Debbie, who has her own collection. "It's fun to find someone this good who's just starting out," Dahlin says, adding that the quality of Smith's craftsmanship is already creating demand among collectors--and higher prices. "It won't be long before I can't afford his knives," Dahlin says.

Some collectors can't afford them now--Smith's creations cost $300 to $5,500. Without advertising, he sold several dozen last year, each designed on paper and made to order. He completes just two or three a month, forging the Damascus-style blade, which has a distinctive rippled texture, by heating steel to 2,300 degrees Fahrenheit and hammering layers of it into intricate patterns. For the handles he often chooses exotic materials such as fossilized tusks of walrus or woolly mammoth, which he buys from a supplier who finds them in Alaska. He also embeds gemstones such as amethysts or sapphires in the handles.

Most buyers showcase Smith's knives instead of, say, gutting deer with them. But all the blades are sharpened to hold up under extreme conditions--the edges of his best knives can shave the ink off a newspaper without cutting the page and are sharp enough to slice through two full soda cans in one swoop.

"People think of a knife as a weapon, but there's something spiritual to making them," says Smith. "It's man's first tool."