His assistant Brian Rice is expected to join him at Easter Road when he returns from holiday.
Hibs launched their search for a new manager following Mixu Paatelainen's surprise decision to resign at the end of last month.
"The search for a new manager is always a difficult task and after a very thorough process we were fortunate to have a number of exceptional candidates," Hibs chairman Rod Petrie told the club's website.
"John Hughes was the unanimous choice of the board not for his exploits as a former player, but for his credentials as a manager, his style of football and his potential to bring success to the club on the field of play.
"I am sure too that John will galvanise everyone connected with Hibernian and drive the club forward.
"The board will never lose sight of the requirement for Hibernian FC to be competing for honours and we see John as the ideal candidate to achieve this."