The Sky Bet Championship strugglers announced the appointment on Twitter on Wednesday morning.
The 56-year-old had been out of work since being relieved of his duties by Norwich in April with the club 17th in the Barclays Premier League.
Hughton has Championship pedigree, having led Newcastle to the title in 2009-10 and Birmingham to the play-offs two seasons later.
He takes over a Brighton outfit struggling at the wrong end of the table, although four points from two games under caretaker boss Nathan Jones means he begins his reign with the club outside of the relegation zone by virtue of goal difference.
Hughton's first game in charge will be Saturday's FA Cup third-round tie against Brentford at Griffin Park, where he ended his playing career.
Brighton chairman Tony Bloom believes Hughton possesses all the tools needed to get Albion back on track, both in the short term and the long term.
He told the club's official website, www.seagulls.co.uk: ''Chris has an excellent record in coaching and management. He's hugely respected, both nationally and internationally, and he has great contacts within the game.
"He is someone who has a real wealth of experience in the top two divisions, from nearly 15 years at Spurs as a coach, assistant and interim manager, through to his more recent work in the Premier League and Championship.
"Chris is also a manager who has a track record for developing talent at all levels from academy upwards and will embrace the work we've been doing at the club in this area in recent seasons.
"Importantly, we also felt Chris is someone who can improve our immediate situation, while also having the management credentials and skills to plan our long-term future and help us to get back to progressing in the way we have in previous seasons.''
After eight months away from management, Hughton is relishing the opportunity to be back in work.
Brighton, beaten in the play-off semi-finals last season, have struggled this time round and go into the new year teetering on the brink of the relegation places.
But the former Tottenham, West Ham, Brentford and Republic of Ireland full-back does not think relegation will be an issue come May.
''I'm thrilled to be back in management and Brighton & Hove Albion is a fantastic club, with a first-class infrastructure both in footballing and business terms,'' Hughton told the club's official website.
"We've got one very obvious initial challenge, and I am aiming to hit the ground running, but I am confident with the resources at the club we can succeed in retaining our status in the Championship.
"Once that is achieved we can work towards getting the club back challenging at the top end of the division."