The 37-year-old goalkeeper almost joined the Gunners during the summer but the deal fell through as the Cottagers failed to bring in a replacement.
Australian Schwarzer has been widely tipped to make the move to north London but Hughes said: 'He's settled down and we're talking to him in terms of his future. He's got options.
Enlarge No deal: Schwarzer (left) was close to signing for Arsenal last month
'He's in the last year of his contract so we'd like to think his future lies here.' Schwarzer signed for Fulham in 2008 after 11 years with Middlesbrough.
Arsene Wenger has been tracking Schwarzer as the Arsenal boss remains unconvinced by Manuel Almunia and Lukasz Fabianski.
Almunia has been dropped for this week's Champions League clash with Partizan Belgrade but Wenger insists this is due to an elbow injury and not as a result of his shocking display in the defeat against West Brom. Fabianski will take his place.
Manuel Almunia dropped. But Arsenal boss Arsene Wenger insists it's due to injury We'll frighten Arsenal! Partizan Belgrade boss promises red hot reception for Gunners Fulham are more stylish now under new boss Hughes, insists KamaraARSENAL FC