Hughton, who had been working as caretaker boss, has been given a contract until the end of the 2010-11 season after taking Newcastle to the top of English football's second tier as the Magpies bid for a quick return to the Premier League.
Ashley has also pledged to put another 20 million pounds into Newcastle this week to keep them financially stable following his unsuccessful attempt to sell the club.
He had spoken to various prospective buyers in recent months without being able to close a deal and Newcastle confirmed that a bid fronted by local businessman Barry Moat had fallen through after he failed to come up with the asking price of 80 million pounds.
A statement explained the club's long-term plan - including renaming St James' Park.
It said: "Whilst confirming these two matters, Newcastle United now aims to move forward on and off the pitch.
"The club aims to maximise its commercial revenues; this includes renegotiating its club sponsor and kit deal, which expire at the end of this season, as well as welcoming offers for the stadium naming rights for next season."
Managing director Derek Llambias praised Hughton for getting Newcastle back on track after relegation and said: "We are delighted that Chris has accepted the post of full-time manager.
"He has done a terrific job this season and we wish him every success for the rest of this season and beyond. He will continue to receive our full backing and support."
Hughton added: "It is a very proud day for me to be named as the manager of this magnificent football club.
"I thank Mike and Derek for their support and will be doing everything in my power to get the club back into the Premier League at the first time of asking."