The Premier League club took action after a 1-0 defeat on Saturday to fellow strugglers West Bromwich Albion left them hovering one place above the relegation zone with five matches of the season remaining.
Norwich face a crucial visit to 18th-placed Fulham, five points below them, next Saturday.
"The Norwich City Board has taken the decision to give the club the maximum chance to secure the points required between now and the end of the season to ensure retention of our Barclays Premier League status," a club statement said.
"The recent run of four defeats in our last six Premier League games and six consecutive away league defeats, left the club with no choice but to act, with five games still to play in the current campaign."
Hughton, 55, had been at the club since the start of last season, after previous managerial spells at Newcastle United and Birmingham City, and his first season in charge ended in an impressive 11th-place finish.
It all turned sour, however, as the club have failed to build on last season's achievement despite spending heavily in the transfer market on players such as attacking pair Ricky van Wolfswinkel and Gary Hooper.
Those two have failed to fire and the club have scored just 26 league goals all season, recently enduring a miserable run of one win in their last six games.
Dissatisfaction among fans came to a head during Saturday's defeat as sections of the home crowd chanted "we want Hughton out".
Although they are five points clear of the drop zone they still have to play league leaders Liverpool, last season's champions Manchester United and top-four sides Chelsea and Arsenal among their final fixtures.
Rather than appoint an established coach with experience of relegation scraps, the club have chosen to look within their own ranks for a solution to their current predicament.
The 48-year-old Adams, who made more than 200 appearances for the club, has never been a first-team manager, but his CV is bolstered by victory in last season's FA Youth Cup final against Chelsea.
"People know what this club means to me, and so it goes without saying that we will be doing everything possible to ensure that we maintain our top-flight status for next season," he said.
"These final five games will be a huge test for us, and everyone must step up to the mark. But with the full backing of these magnificent Norwich supporters we will have every chance of achieving our objective."
Coaches Colin Calderwood and Paul Trollope have also left the club.
- Sports & Recreation
- Barclays Premier League
- West Bromwich Albion