The former Celtic defender secured the position ahead of the likes of Alloa boss Paul Hartley and former Kilmarnock manager Kenny Shiels after Terry Butcher left the club to move to Easter Road.
Hughes has been without a job since being sacked by Hartlepool at the end of last season.
The 49-year-old failed to keep Pools in League One after taking over when they were nine points adrift in November.
Hughes had instigated a revival and secured the manager of the month award in February following a seven-match unbeaten run, but his side then failed to score in eight games and were relegated despite a four-game undefeated finish to the season.
Hughes began his managerial career with Falkirk, taking them up to the top flight and keeping them there for four seasons, his final game a 1-0 Scottish Cup final defeat by Rangers in 2009.
He led Hibs to a European place in 2010 in his first and only full season but was sacked in the October of that year after a poor run of results stretching back from the previous campaign.
The Edinburgh-born manager will take on a side sitting second in the league and still competing in both cup competitions having won five consecutive matches.
His first game in charge will be at St Mirren Park on Saturday.
"I've got big shoes to fill in Terry Butcher," Hughes told Sky Sports News. "I've met the players and I've said that to them; it's business as usual.
"Terry and Maurice done a wonderful job at this club," added Hughes. "The position Inverness are in might have scared one or two people but it excites me.
"I feel I've got the experience and the personality to bring success to the club.
"I met the players yesterday and the spirit that's in that dressing room that Terry has built up is fantastic.
"I think they are proud of the fact of always having the underdog tag and that creates a siege mentality.
"If I can go and match the lofty heights that Terry Butcher did at this club, then I'm doing a right good job."