The George Cross is the country's highest award for gallantry by civilians, or by military personnel not in the presence of the enemy.
The George Cross has now been awarded a total of 161 times.
At a ceremony in the City of London, Chief of the Defence Staff Air Chief Marshal Sir Jock Stirrup said: "The actions of Staff Sgt Hughes and the late Staff Sgt Schmid meet this most demanding test in full measure.
"Their selfless commitment, unswerving devotion to duty and unsurpassed courage are both awe-inspiring and humbling."
Both recipients were deployed to Helmand Province as part of 19 Light Brigade. Their duties coincided with Operation Panther's Claw, a counter-insurgency operation which saw an increase in Taliban activity.
Staff Sgt Schmid, who had been in the Army for 13 years and was a member of the Oxfordshire-based 11 Explosive Ordnance Disposal Regiment, deployed to Afghanistan in June 2009.
He was born in Cornwall, and lived in Winchester with his wife and five-year-old stepson.
At the time of his death he was a week away from flying back to the UK for a two-week break.
Staff Sgt Hughes was said to have defused 80 bombs
He was killed last October during an operation during a day in which he had already dealt with three devices.
His citation said his actions "probably saved the lives of his team".
It added: "These occasions are representative of the complexity and danger that Schmid had faced daily throughout his four month tour.
"His selfless gallantry, his devotion to duty, and his indefatigable courage displayed time and time again saved countless military and civilian lives and is worthy of the highest recognition."
Staff Sgt Schmid's wife, Christina, was presented with his citation at the ceremony in the ballroom at the Honourable Artillery Company.
She later paid tribute to the work of her husband and Staff Sgt Hughes and said she was "massively proud" of the awards.
Jonathan Beale Defence Correspondent
It was a simple, sober ceremony to honour two men of extraordinary courage. The Chief of the Defence Staff - Air Chief Marshall Sir Jock Stirrup - summed it up describing both men as "the bravest of the brave".
Staff Sergeant Olaf Schmid and his good friend Staff Sergeant Kim Hughes had been doing the most dangerous jobs in one of the most lethal places on earth. As bomb disposal experts their actions saved many lives.
It's worth remembering that IEDs, or roadside bombs, have been the single biggest killer of British troops in Afghanistan. The unseen weapon remains the Taliban's favoured method of waging war.
Of the 275 British soldiers killed in Afghanistan, 151 have died as a result of roadside bombs. Eight bomb disposal experts have also lost their lives.
Olaf Schmid's wife Christina has kept his memory alive, and glowed with pride as she received his citation. There's no doubt that these bomb disposal experts are "the few" in this war.
A record number of awards are being made this year to British soldiers - more than 150 medals. It's also a telling reminder that last year was the deadliest yet for British troops in Afghanistan.
"They're usually under fire... they're absolutely working at such a tempo to keep our forces safe and moving around, and also for civilians," she said.
Their George Cross medals will be presented at a royal investiture at a future date.
Staff Sgt Hughes, from Telford, Shropshire, is credited with defusing 80 devices during his tour.
On 18 August 2009, he was deployed to secure an emergency helicopter landing site south west of Sangin.
Staff Sgt Hughes told the BBC he had "just being doing his job".
"It was just a day that had an horrendous ending and we just cracked on and dealt with what we needed to do.
"There were casualties, fallen soldiers, my rest and myself had to go and clear the injured soldiers and extract the fallen. In doing so, we came across a number of devices."
In October, he made the news when he told Defence Secretary Bob Ainsworth, during a visit to Afghanistan, that more troops were needed on the ground.
On Friday, nearly 150 other medals are expected to be announced by the Ministry of Defence recognising the efforts of British service personnel in Afghanistan, Iraq and other parts of the world.
Royal Marines reservist Lance Corporal Matthew Croucher, who risked his life to save his comrades by throwing himself on a live grenade in Afghanistan in February 2008, was the last recipient of the George Cross.
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