The 42-year-old becomes the Dragons' third permanent appointment of the season after first, Sam Ricketts and then Graham Barrow left the club.
Previously a Wrexham player, Hughes has signed a three-and-a-half year deal at The Racecourse Ground.
A statement on the club's website reads: "Bryan is an excellent coach who has a strong affinity for the Club.
"His appointment signals our intent to go back to the model which has seen us progress on the pitch and again become competitive in the league.
"Bryan will be completely focussed on building momentum in the final 15 games of the season as we look to achieve a successful end of the season."
Hughes' first game in charge will be Saturday's home game against Dagenham & Redbridge.