Although smoking during pregnancy may lead to many adverse outcomes, numerous studies have reported a paradoxical inverse association between maternal cigarette smoking during pregnancy and preeclampsia. Using a counterfactual framework we aimed to explore the structure of this paradox as being a consequence of selection bias. Using a case-control study nested in the Icelandic Birth Registry (1309 women), we show how this selection bias can be explored and corrected for. Cases were defined as any case of pregnancy induced hypertension or preeclampsia occurring after 20 weeks' gestation and controls as normotensive mothers who gave birth in the same year. First, we used directed acyclic graphs to illustrate the common bias structure. Second, we used classical logistic regression and mediation analytic methods for dichotomous outcomes to explore the structure of the bias. Lastly, we performed both deterministic and probabilistic sensitivity analysis to estimate the amount of bias due to an uncontrolled confounder and corrected for it. The biased effect of smoking was estimated to reduce the odds of preeclampsia by 28 % (OR 0.72, 95 %CI 0.52, 0.99) and after stratification by gestational age at delivery (<37 vs. ≥37 gestation weeks) by 75 % (OR 0.25, 95 %CI 0.10, 0.68). In a mediation analysis, the natural indirect effect showed and OR > 1, revealing the structure of the paradox. The bias-adjusted estimation of the smoking effect on preeclampsia showed an OR of 1.22 (95 %CI 0.41, 6.53). The smoking-preeclampsia paradox appears to be an example of (1) selection bias most likely caused by studying cases prevalent at birth rather than all incident cases from conception in a pregnancy cohort, (2) omitting important confounders associated with both smoking and preeclampsia (preventing the outcome to develop) and (3) controlling for a collider (gestation weeks at delivery). Future studies need to consider these aspects when studying and interpreting the association between smoking and pregnancy outcomes.