Hughes, 47, joined Liverpool in 2024 from Bournemouth. He appointed Arne Slot as Jurgen Klopp's successor as manager, a decision that paid immediate dividends as the Reds claimed the Premier League title in 2024-25. Slot was then sacked and replaced by Andoni Iraola in June.
"The appointment of Hughes came as part of Al Hilal's efforts to strengthen its football system and develop its sporting structure with specialized expertise," the SPL leaders said in a statement.
The appointment highlights Al Hilal's drive to tap into English football expertise, with Hughes the latest former Premier League figure to join the Riyadh-based club.
Hughes follows Gabriel Martinelli, Crysencio Summerville and Ollie Watkins, who joined the Saudi club this year from Arsenal, West Ham United and Aston Villa, respectively.