Proof.
We will use Lemma 88.4.2 without further mention.
Assume (1). Recall that formation of \mathop{N\! L}\nolimits _{B/A} commutes with localization, see Algebra, Lemma 10.134.13. Hence by the very definition of smooth ring maps (in terms of the naive cotangent complex being quasi-isomorphic to a finite projective module placed in degree 0), we see that \mathop{N\! L}\nolimits _{B/A} satisfies the fourth equivalent condition of More on Algebra, Lemma 15.84.10 with respect to the ideal IB (small detail omitted). Since \mathop{N\! L}\nolimits _{B^\wedge /A}^\wedge = \mathop{N\! L}\nolimits _{B/A} \otimes _ B B^\wedge by Lemma 88.3.2 we conclude (2) holds by More on Algebra, Lemma 15.84.7.
Assume (2). Choose a presentation B = A[x_1, \ldots , x_ n]/J, set N = J/J^2, and consider the element \xi \in \mathop{\mathrm{Ext}}\nolimits ^1_ B(\mathop{N\! L}\nolimits _{B/A}, J/J^2) determined by the identity map on J/J^2. Using again that \mathop{N\! L}\nolimits _{B^\wedge /A}^\wedge = \mathop{N\! L}\nolimits _{B/A} \otimes _ B B^\wedge we find that our assumption implies the image
\xi \otimes 1 \in \mathop{\mathrm{Ext}}\nolimits ^1_{B^\wedge }(\mathop{N\! L}\nolimits _{B/A} \otimes _ B B^\wedge , N \otimes _ B B^\wedge ) = \mathop{\mathrm{Ext}}\nolimits ^1_{B^\wedge }(\mathop{N\! L}\nolimits _{B/A}, N) \otimes _ B B^\wedge
is annihilated by I^ c for some integer c \geq 0. The equality holds for example by More on Algebra, Lemma 15.99.2 (but can also easily be deduced from the much simpler More on Algebra, Lemma 15.65.4). Thus M = I^ cB\xi \subset \mathop{\mathrm{Ext}}\nolimits ^1_ B(\mathop{N\! L}\nolimits _{B/A}, N) is a finite submodule which maps to zero in \mathop{\mathrm{Ext}}\nolimits ^1_ B(\mathop{N\! L}\nolimits _{B/A}, N) \otimes _ B B^\wedge . Since B \to B^\wedge is flat this means that M \otimes _ B B^\wedge is zero. By Nakayama's lemma (Algebra, Lemma 10.20.1) this means that M = I^ cB\xi is annihilated by an element of the form g = 1 + x with x \in IB. This implies that for every b \in I^ cB there is a B-linear dotted arrow making the diagram commute
\xymatrix{ J/J^2 \ar[r] \ar[d]^ b & \bigoplus B\text{d}x_ i \ar@{..>}[d]^ h \\ J/J^2 \ar[r] & (J/J^2)_ g }
Thus (\mathop{N\! L}\nolimits _{B/A})_{gb} is quasi-isomorphic to a finite projective module; small detail omitted. Since (\mathop{N\! L}\nolimits _{B/A})_{gb} = \mathop{N\! L}\nolimits _{B_{gb}/A} in D(B_{gb}) this shows that B_{gb} is smooth over \mathop{\mathrm{Spec}}(A). As this holds for all b \in I^ cB we conclude that \mathop{\mathrm{Spec}}(B_ g) \to \mathop{\mathrm{Spec}}(A) is smooth over \mathop{\mathrm{Spec}}(A) \setminus V(I) as desired.
\square
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