But that raises a question mark over the position of Fulham's first-team coach Ray Lewington, who was caretaker manager after Hodgson left for Liverpool earlier this month.
It is also believed that Hughes will look to tempt out-of-favour City players to London, including Craig Bellamy, Roque Santa Cruz and Stephen Ireland.
"I have discussed my aspirations with both the chairman [Mohamed Al Fayed] and Alistair Mackintosh [chief executive, with whom he worked at City] and believe that we are aligned in our aims for what can realistically be achieved here," said Hughes.
"I hope the Fulham fans will enjoy some special times during this season's campaign and we will work hard to achieve that."
He added: "I'm looking forward to working with the squad as soon as possible, and in making sure the on-pitch preparations are complete before the first competitive ball is kicked in August."
Hughes, a former Manchester United, Barcelona and Chelsea striker, began his managerial career with Wales in 1999. He took them to the brink of qualification for Euro 2004, only to denied by a play-off loss to Russia.
I know that he understands my vision for the club
Chairman Mohamed Al Fayed
In 2004, he became manager at Blackburn and guided them to an FA Cup semi-final and a place in the Uefa Cup.
He was appointed by City in 2008 but the club's change of ownership and hugely increased budget and level of expectation meant he only had 18 months in the job before he was replaced by Roberto Mancini.
At Fulham, he will work with more modest resources but will inherit a side left in good shape by Hodgson.
Last season, Hodgson guided the Cottagers on a memorable Europa League campaign, which ended when they lost in the final to Atletico Madrid.
Fulham had attempted to recruit Ajax coach Martin Jol but were forced to look elsewhere when the Dutch club refused to let the former Tottenham manager leave.
However, Cottagers chairman Mohamed Al Fayed described Hughes as "a great guy".
Al Fayed added: "I know that he understands my vision for the club and believes in what we want to achieve.
"We have enjoyed two incredibly successful years and my hopes and dreams for this club are for that journey to continue."
Hughes's first Premier League game in charge of Fulham will be away to Bolton on 14 August. The Cottagers will then host Manchester United on 22 August.
This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.