
The 44-year-old former Manchester United and Chelsea striker, who took over at Rovers in September 2004, extended his existing contract, which will be followed by a rolling 12-month deal.
Hughes had been an outside candidate for the vacant England head
coach role after the sacking of Steve McClaren but Rovers moved quickly to tie down their man.
"The club has made significant progress during Mark's tenure," Blackburn chairman John Williams said.
"We are delighted he has signed a new contract - it's very good news. Mark has done - and continues to do - a very good job and we are very confident in his ability to drive the club forward."
Blackburn have enjoyed their best start to a Premier League season since they won it in 1995 and currently sit seventh in the table, eight points off the lead.