Pennant appeared to be on his way out of the club when his previous deal expired in the summer after finding himself out of favour under former boss Tony Pulis.
However, Hughes opted to keep Pennant and offered the former Arsenal and Liverpool winger a new 12-month deal as he feels he still has a lot to offer.
"We had a list of players being released and, because he was out of contract, his name was on it," said Hughes.
"I had a man-to-man conversation and asked him where he wanted to be.
"I told him my intention was to keep him because, in the back of my own mind, I didn't like the idea of Jermaine Pennant rocking up one Saturday afternoon at the Britannia in opposition colours.
"That didn't sit comfortably when there was an opportunity to keep a good player."
Pennant has earned himself something of a bad boy image, but Hughes says he has been impressed by the 30-year-old
"I've not seen that in him," added Hughes. "He had a situation here last season where he wasn't playing.
"Since I've been here, he's worked exceptionally hard and I've been really pleased with what I've seen and I can only judge people on what I find."