Hughes, who had been an adviser to Bush when he was governor of Texas and during his first term as president, will have the title of ambassador.
Secretary of States Condoleezza Rice read Hughes the oath of office in the ornate Ben Franklin room at the State Department. The audience of about 150 included several ambassadors and officials, as well as Hughes' husband and children.
Bush used the occasion to thank more than 100 countries that have offered aid to Hurricane Katrina victims. He single out several countries including Afghanistan, Kuwait, Sri Lanka and Israel.
Bush said the international response to Katrina reminds him of the international response after the Sept. 11, 2001, terrorist attacks.
Hughes said the disaster reminded her there is "one common humanity."
"What unites us as human beings is much greater than even the important matters on which we sometimes disagree," she said.