Phil Brown was poised to take the job, until a disagreement in talks with chairman Ken Hodcroft and chief executive Russ Green early yesterday afternoon.
Negotiatons stalled, Brown left for home and, while he may have expected the club to go cap in hand to him and adhere to his wishes, within hours Pools had tempted Hughes to leave Scottish first division Livingson for a first spell in English football management.
The ex-Celtic centre-half, 48, has also been boss of Falkirk and Hibs during a nine-year management career. He took Falkirk into the SPL and to the Scottish Cup final in 2009, and also led Hibs into Europe before taking charge of Livingston in February this year. He has won 148 of 364 career games as a boss and leaves the club in mid-table.
Brown looked certain to take the post, and, after watching Pools reserves on Monday night, he briefed reporters that he was taking over and all that was left to complete were the finer details of his contract.
However, it was those nuances that caused the problems and talks hit the buffers on contractual issues.
He was set to arrive with trusted lieutenant Brian Horton as his right-hand man and goalkeeping coach Fred Barber. That wasn't a problem for the Victoria Park hierarchy.
Hughes, nicknamed Yogi, had impressed Pools in his interviews and was watching his reserve side take on Partick Thistle yesterday afternoon when the offer was made for his services.
He then informed his employers following the game he was leaving to take over at Pools.
Micky Barron, will now continue as part of the first-team set up alongside Hughes, while remaining as reserve team boss.
''We're convinced we've got the right man in place to take the club forward,'' Hartlepool chief executive Russ Green said.
''Everybody knows that this appointment was a crucial one for the club so we have taken our time, assessed our options and John is the choice we are all extremely happy with.
''He has a vision for the football club, he has a passion and a drive to succeed and we hope that the fans will be as excited as we are to have him in place.''
Livingston director of football, John Collins, said: ''I brought John Hughes in with me when I joined Livingston earlier in the year because of his professionalism and passion for the brand of football that I want Livingston to play.
''I'm naturally disappointed that he has attracted the interest of another club, but not surprised, and I wish him well at Hartlepool.''
Hughes was first linked with Pools 12 months ago before Neale Cooper was appointed and, following Cooper's exit three weeks ago, he remained high in their thoughts.
The Northern Echo revealed on Monday he was one of four candidates to be interviewed, but Brown put himself in pole position.
Hughes arrive with a tough reputation and won't be afraid to shake up the under-performing Victoria Park dressing room. His only previous experience of English football was a 24-game spell at Swansea City in 1990, but since becoming a manager he has held an ambition to coach south of the border.
Hughes will be introduced to the media at a Victoria Park press conference this afternoon and his first game in charge, with Pools nine points shy of safety and without a win since September 1, will be against Coventry on Saturday.