The deal includes a 12-month extension should the Valiants, currently second in npower League Two, win promotion at the end of the campaign.
Hughes had his contract at Notts County terminated by mutual consent on Monday afternoon, making him a free agent.
The 36-year-old almost joined Vale in November but his protracted move to Burslem did not go through before the deadline for loan deals.
After finally getting his man, manager Micky Adams told the club's official website: "Lee has scored goals at all levels and I think it is a real coup that we have managed to sign him for Port Vale.
"The squad have done fantastically well already this season and I believe that Lee's signing will give us even more strength in depth and experience, as well as another option in the final third."
Hughes added: "I am very excited to join Port Vale. It is a fantastic club steeped in football history and it has a real chance to reclaim former glories under new ownership.
"I am really looking forward to working with Micky Adams, who I have long respected. The team is having a tremendous season and so I shall do my utmost to score goals and help the team in its promotion push.
"I love playing football and am grateful to Micky Adams and (chairman) Paul Wildes for allowing me this exciting new opportunity."
Hughes becomes Adams' third recruit since the transfer window opened a week ago following short-term deals for the returning Chris Birchall and Darren Purse.