Hughes, 61, will be joined by Glyn Hodges as his assistant and returns to management after being dismissed by Bradford City in October 2023.
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During his 18-month spell at Bradford, Hughes led the team to sixth place in League Two, losing in the play-offs to Carlisle.
This was his only managerial role outside the top flight, having previously managed 466 Premier League games with clubs like Manchester City, Blackburn, and Stoke.
Hughes also had a five-year stint managing the Wales national team, guiding them to a Euro 2004 play-off, though he couldn’t secure qualification.
A legendary player, Hughes won 11 major trophies with clubs including Manchester United, Barcelona, and Chelsea, and earned 72 caps for Wales.