Consider the inverse first-passage problem: Given a diffusion process $\{\frak{X}_{t}\}_{t\geqslant 0}$ on a probability space $(\Omega,\mathcal{F},\mathbb{P})$ and a survival probability function $p$ on $[0,\infty)$, find a boundary, $x=b(t)$, such that $p$ is the survival probability that $\frak{X}$ does not fall below $b$, i.e., for each $t\geqslant 0$, $p(t)= \mathbb{P}(\{\omega\in\Omega\;|\; {\frak{X}}_s(\omega) \geqslant b(s),\ \forall\, s\in(0,t)\})$. In earlier work, we analyzed viscosity solutions of a related variational inequality, and showed that they provided the only upper semi-continuous (usc) solutions of the inverse problem. We furthermore proved weak regularity (continuity) of the boundary $b$ under additional assumptions on $p$. The purpose of this paper is to study higher-order regularity properties of the solution of the inverse first-passage problem. In particular, we show that when $p$ is smooth and has negative slope, the viscosity solution, and therefore also the unique usc solution of the inverse problem, is smooth. Consequently, the viscosity solution furnishes a unique classical solution to the free boundary problem associated with the inverse first-passage problem.