The 20-year-old was entitled to leave Everton on a free transfer after the Toffees failed to give a written offer to the out-of-contract player by mid-May.
Despite interest from Bolton and Sunderland the England Under-21 chose to join Hughton's squad where he has been handed the number 15 shirt.
Gosling will miss the start of the Premier League campaign because he is recovering from a serious knee injury sustained in a clash with keeper Wolves keeper Marcus Hahnemann.
But if can fulfil his potential the highly-rated midfielder could turn out to be the best value capture of the summer and Hughton is hoping to identify similar shrewd signings.
The manager said: We're delighted to have signed Dan.
He's the right age and the profile that he has is what makes it such an appealing capture for us.
He's young but has Premier League experience and he's someone who can continue to develop his game.
We see him as a high-energy player and a player that can play from box-to-box, but he's also a young player with experience, so he won't be phased by what is ahead of him.
I know I said on the radio that there was money to spend and there is, but I think everyone appreciates that the days of big spending are in the past at this particular time.
There will be minimal spending which means it is about trying to find value for money out there. That is my job as manager and even though we are working within certain restrictions I'm confident that I can do that.
We are working very hard behind the scenes and I'm very confident that we will be able to bring in what we need to bring in.
Gosling, who made his league debut against Middlesbrough in 2008 and scored his first senior goal against Sunderland, was delighted to complete a switch to Tyneside.
It's a brilliant move for me.
Now that the deal is done I just can't wait to get started.
I've played at St James' Park and know all about the amazing atmosphere,'' he said.
Playing there in a black and white shirt is something I've thought about already and it will be a great day when I finally get to walk out in front of 50,000 people.
The gaffer and all of the lads have been great with me and made me feel really welcome since I arrived and hopefully I can repay the faith that they've shown in me.
Hughton's chances of bringing Sol Campbell to St James' Park received a boost after Sunderland boss Steve Bruce revealed the signing of Titus Bramble signalled the end of the Wearsiders' interest in the former England centre-half.
Newcastle face competition from Celtic and Arsenal for his signature.