Hughton was previously caretaker after the departure of Kevin Keegan last season, again after Joe Kinnear stood down through illness and was then assistant to Alan Shearer as Newcastle slid out of the Premier League.
Back as caretaker this season he has steered them to the top of the Championship and has been rewarded with the job on a full-time basis until the end of next season.
Managing director Derek Llambias told the club's website that Ashley had decided not to sell after the latest potential buyer failed to meet his 80 million pounds asking price.
Instead, Ashley will put a further 20 million pounds into the club this week and said he was "totally committed to the future success of Newcastle."
And in a move that is likely to cause uproar among Newcastle's loyal but long-suffering fans, officials said that they would "welcome offers" next season for the naming rights for St James' Park, their home for 117 years.
"We are delighted that Chris has accepted the post of full-time manager. He has done a terrific job this season and we wish him every success for the rest of this season and beyond," Llambias said.
Former Tottenham Hotspur and Ireland full-back and Spurs assistant coach, Hughton said: "It is a very proud day for me to be named as the manager of this magnificent football club.
"I thank Mike and Derek for their support and will be doing everything in my power to get the club back into the Premier League at the first time of asking.
Ashley, who made his fortune through a chain of sports shops, bought Newcastle for around 135 million pounds in 2007
He put the club up for sale in September last year, took it off the market three months later then invited offers again in May after Newcastle's relegation.
Earlier this month, a Premier League arbitration panel ruled that Ashley should pay Keegan 2 million pounds in compensation following Keegan's claim of constructive dismissal.
