The 48-year-old took succeeded fellow Scot Neale Cooper at Victoria Park in November last year with them nine points adrift at the bottom of the League One.
However, he was unable to prevent United from being relegated after winning just eight of the 29 games for which he was in charge.
Assistant first and reserve team coach Micky Barron has also had his deal with the club terminated.
In a statement on their official website, Hartlepool said: "The club would like to thank John for all his efforts to try and secure League One status since he joined the club in November 2012. We wish him all the very best for the future.
"Hartlepool United would also like to thank Micky for his commitment and effort during his time as assistant first and reserve team coach and he also leaves with our very best wishes."
Hughes joined Hartlepool from Livingston having previously managed Hibernian and Falkirk, both of whom he represented during his playing days.
Barron first joined Hartlepool as a player on loan from Middlesbrough in 1997 and went on to make 374 appearances, mainly at full-back.
He became youth-team coach in 2007 and worked as first-team coach during the 2010/11 season. Barron was twice appointed caretaker manager following the sackings of Mick Wadsworth in 2011 and Cooper in 2012.