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Edwards, who previously worked as Liverpool's sporting director, has been appointed CEO of Football as Fenway Sports Group (FSG) - the company which owns Liverpool.
He will take on Mike Gordon's responsibilities and will appoint a sporting director for Liverpool, with Hughes understood to have agreed to take on the role.
Hughes will be responsible for identifying and recruiting Jurgen Klopp's successor.
It is understood Edwards turned down numerous offers since his exit from Liverpool in 2022, including Manchester United and Chelsea.
But Edwards has been persuaded to return to the Anfield club "in a role with greater seniority than he held previously and with a wider remit", according to FSG president Gordon.
"It was clear when we initially reached out to him that a broader scope would be a key motivating factor for any potential return to the industry," he added. "In this regard - and many others - his ambitions matched ours."
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Edwards had initially rebuffed an approach from Liverpool's owners to oversee the post-Jurgen Klopp era at Anfield, but face-to-face talks with FSG in Boston last weekend paved the path for his return.
The remit discussed was wider than initially stipulated and offered more responsibility than other roles Edwards has turned down since stepping aside from the Merseyside club in 2022, specifically becoming Chelsea's CEO of Football.
He had also been discussed internally at Manchester United, but not in a capacity that would have appealed to him in their pre-INEOS structure.
Paris Saint-Germain and Real Madrid made checks on Edwards' interest in taking over sporting director duties, but it was clear he would not be operating in that capacity moving forward.
FSG owner John W Henry and Gordon were acutely aware of that and had proposed a wider-ranging position. After initially being knocked back, they were able to make a more compelling pitch in the US, incorporating more than just Liverpool.
Edwards will ensure Klopp's successor has a solid structure to continue delivering sustainable success.
It is understood Hughes, who had informed Bournemouth he would be leaving as technical director last year with his exit confirmed on Wednesday, will report to him.
The most pressing task for the pair is securing a replacement for Klopp.
Xabi Alonso, wanted by Bayern Munich, remains the outstanding candidate. Alternative options like Sporting manager Ruben Amorim have also been analysed.
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