Barry, who was a target for Liverpool last summer, left Aston Villa in a surprise £12million move after 12 years and more than 400 matches for the club.
Hughes said: "Gareth is widely acknowledged as one of the top midfielders in the Premier League and that is a recommendation in itself.
"When players of his quality become available then you have to be in the market for them so we are absolutely delighted that we have been able to conclude this deal.
"The experience required to compete with the best in the Premier League is vital.
"With Gareth we get the experience of someone who has played week-in, week-out in the hardest league in the world.
"He plays at a level that has an impact on the game and we are thrilled that he is joining us."
Club captain Richard Dunne, currently on Republic of Ireland duty, welcomed Barry on board.
"He is a really good player and a player the Aston Villa fans will really miss, " said the defender.
"It shows the pulling power of the club. It's the sort of signing the manager is looking for - players with Premier League experience who can push the squad on."
Barry has proved to be adaptable over the years and that is a trait that Hughes believes will serve City well.
"I like players that have the sort of flexibility that enables you to change your tactics if you need during a game, and Gareth has that," he told City's official website.
"He also has a range of passing that I am keen to introduce to the team, and he has got great delivery at set-plays as well. He will bring a lot to City.
"I have spoken to him briefly, and I will do at greater length soon. It is clear to everybody that being at City is going to be exciting in the future, and Gareth sees that."
Barry had publicly stated he wanted to play in the Champions League and manager Martin O'Neill knew it would be difficult to hang on to the player should one of the top four come calling.
However, Barry's decision to join the revolution being undertaken by Hughes at Eastlands - and bankrolled by Abu Dhabi's Sheikh Mansour Bin Zayed Al Nahyan - will have come as a shock to O'Neill and Villa fans alike.
City have not even qualified for next season's revamped Europa League and some supporters are certain to believe Barry has moved because of the £80,000-a-week salary at Eastlands.
But it is understood Barry has received assurances regarding the quality of player Hughes is looking to bring in this summer to help establish City as a major force.
And he is likely to be assured of regular first-team football - a crucial factor in the build-up to the 2010 World Cup finals in South Africa, assuming England qualify.
Barry, currently with the England squad preparing for a World Cup qualifier in Kazakhstan on Saturday, said: "I'm delighted to be joining City.
"It didn't take much persuasion from Mark Hughes, they are heading in the direction I want to go.
"There is great potential here, and I'm sure there will be a few more additions to the squad this summer."