Hughes joined Stoke in May 2013, replacing fellow Welshman Tony Pulis who had turned the club into an established Premier League team in his seven years at the helm.
Hughes arrived having won only eight of 34 games at Queens Park Rangers but has led the Potters to their first top-10 Premier League finish and is on course to repeat the feat this season.
“I’m delighted to have signed a new contract. I think it’s exciting times for Stoke City; everyone can see there’s more progress to be made and we want to see how far we can take the club," he told the club website (www.stokecityfc.com) on Friday.
“I came here 18 or so months ago and it’s gone as well as I could have hoped -- we’ve certainly kept progressing which is vitally important from my point of view.
"This season has been more difficult than last season due to circumstances, like injuries to key players, but we’ve still been very competitive and I believe we can do even better next season with a little bit more investment. Let’s see how far we can go.”
Pulis had forged a reputation as one of the English top flight's most reliable managers with a brand of physical football which often disconcerted some of the league's biggest teams.
When he left by mutual consent and Hughes was drafted in with the promise of a more expansive brand of football, many critics feared it could see Stoke fall out of the Premier League.
Results have proved the critics wrong, however, and Hughes's side are 10th in the table with eight games remaining this season.
“Continuity is a huge thing in football, certainly in the Premier League, and hopefully the fact I’ve signed a new contract will give continuity to the club and, more importantly, the players because it helps them when they work with someone for a prolonged spell," Hughes said.
“They know what to expect and know the quality of work they are going to get and that’s important moving forward.”
Prior to his disappointing spell at QPR, Hughes, a former Manchester United, Barcelona and Chelsea forward, had enjoyed more success as a manager with Blackburn Rovers, Manchester City, Fulham and on the international stage with Wales.
(Reporting by Toby Davis; editing by Ed Osmond)
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