Clarke read a prepared statement on behalf of the national team and support staff at the SCG on Saturday morning.
A visibly distraught Clarke struggled to get the words out, as he paid tribute to a close friend who "epitomised what the baggy green is about and what it means to us all".
"To Greg, Virginia, Jason and Megan (Hughes' family), we share in the deep pain that you're feeling," Clarke said.
The 25-year-old Hughes died on Thursday after being struck by a bouncer during a Sheffield Shield game on Tuesday.
"Things were always put in perspective when Hughesy said 'where else would you rather be boys, but playing cricket for your country?'.
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Clarke revealed Phillip Hughes' one-day shirt number would be retired.
"Our promise to Hughesy's family is that we will do everything we can to honour his memory," Clarke said.
"Last night, I asked Cricket Australia if Hughesy's Australian one-day international shirt, number 64, could be retired - to which they agreed."
Clarke fought back tears throughout the statement to the media, regularly taking breaks to compose himself.
"Apart from when he was home on the farm with his beloved cattle, Hughesy was at his happiest playing cricket for his country with his mates," he said.
"Things were always put in perspective when Hughesy said 'where else would you rather be boys, but playing cricket for your country?'.
"We're going to miss that cheeky grin and that twinkle in his eye.
"The world lost one of its great blokes this week and we are all poorer for it."
Clarke added that Hughes' legacy of "trying to improve each and every day will drive us for the rest of our lives".
"We'd like to thank everyone here and overseas for the touching tributes to Hughesy in recent days," he said.
"Our dressing room will never be the same. We loved him and always will."
"Rest in peace bruzzy."
Clarke's words came as cricketers around Australia started taking the field on a sombre Saturday.
Grade cricket in Sydney and Adelaide, the two cities were Hughes plied his trade as a professional cricketer, was cancelled.
But club and school games otherwise largely went ahead as planned, with the cricket community continuing to grieve the shock death of Hughes.
Players - young and old - donned black armbands and stood for 63 seconds of silence at matches around Australia.
Cricket Australia asked the mandatory retirement score for junior players to be lifted from the traditional 50 to 63.
Hughes was unbeaten on 63 batting for South Australia on Tuesday when he played his last stroke.
The left-hander was Australia's 408th Test player and the number has been painted on cricket fields around the country.
News Corp Australia on Saturday published emotional columns from South Australian coach Darren Berry and former Test captain Ricky Ponting.
Ponting recalled Hughes' maiden Test tour, when the 20-year-old scored a century in each innings against a star-studded South African attack.
"Dale (Steyn), Morne Morkel and Makhaya Ntini can be pretty threatening and they were going hard with the ball and a bit of verbal," Ponting wrote.
"I thought I'd better go down there and check how he was but, before I got there, he looked up and grinned at me.
"I'm absolutely loving this, he said."
Ponting said he was going to miss Hughes terribly.
"He stuffed up big time in England on his first trip there ... he just kept using his Australian mobile to roam the internet, make calls," he wrote of Hughes.
"I can't remember if his bill was $26,000 or $36,000 but I know it was so much that he had to work it off by doing commercial appearances for the phone company.
"I wish I could pick up the phone and give him a call now."
Berry detailing why the "little batsman with the big heart" was so universally loved.
"His impact in our dressing room in a short space of time was enormous," Berry wrote of Hughes, who shifted to Adelaide in 2012.
"He was a great role model for our young team.
"He was a charming, cheeky larrikin and someone who taught all of us plenty."
Tributes continue to flow from around the world, with The Queen sending a private message of condolence to the Hughes family.
