Hughes was born in Pittenweem, Fife, Scotland, the third son of Thomas Hughes and his wife Eliza, née Anderson. Hughes attended school in Crail and was apprenticed to a cooper for a short time - he then entered the merchant service and became a master, including whaling in the Arctic for several years. After hearing of opportuntiues for trade in Asia, Hughes purchased a brig, Hero, in Calcutta and traded opium in the Indian Ocean and seas of China having to contend with pirates.
Hughes emigrated to South Australia in 1840, started business with Bunce & Thomson and took up land. Hughes suspected the land on which he kept sheep contained mineral deposits and informed his shepherds to look for minerals. In 1860 the Wallaroo copper-mine was discovered on his property, and in 1861 the even more important Moonta mine was discovered nearby. Hughes secured the largest interest in both mines and became wealthy, although Hughes paid several thousand pounds to rival claimants. In 1873 he joined with Thomas Elder in bearing the expense of the exploring expedition under Colonel Peter Warburton. In 1872 Hughes offered £20,000 for the endowment of a theological college. It was, however, felt that so large a gift might be better used to found a university, and Hughes agreeing, the Adelaide University Association was established. The act of incorporation of the University of Adelaide was passed in 1874, but practically speaking the university did not begin to operate until three years later.
Hughes subsequently returned to England, bought the Fancourt estate at Chertsey, Surrey, and died there on 1 January 1887 after a long illness. Hughes married in 1841 Sophia, daughter of James Henry Richman, who died in June 1885. Hughes was knighted in 1880. He has been frequently referred to as the "father" of the University of Adelaide. The report of the council of the university for the year 1887, in recording their regret at his death, called him "the Founder of the Chair of Classics and of the Chair of English Language and Literature, and Mental and Moral Philosophy--whose munificence led to the establishment of the University".