The former Manchester United and Wales striker was unable to save the club from relegation in his first season in charge at Brunton Park after joining them in February 2025.
Hughes, 62, remained with the club, charged with restoring Carlisle to League Two, but a third-place finish left them at the mercy of the National League play-offs and they were eliminated with a 2-1 home defeat by Boreham Wood in the semi-final.
"Mark has conducted himself with real professionalism throughout his time at Carlisle United," said chairman Tom Piatak.
"We are grateful for the work he has done, the standards he brought, and the progress made during the season.
"Following open and respectful discussions, both parties agreed this was the right time for the club to move in a different direction.
"Mark leaves with our thanks and best wishes, and he will always be welcome at Brunton Park."
Hughes, whose only previous managerial experience had come at international level with Wales and in the Premier League with Manchester City and Blackburn among others, made a surprise return to coaching in 2022 with Bradford City.
He departed with the club 18th in League Two 20 months later.
His arrival at Carlisle was also unexpected, bringing, as it did, a modern-day footballing great to Cumbria, but after suffering relegation in his first season, his future was always likely to rest on instant promotion.
Despite garnering a club-record 95 points, Carlisle fell short.
First-team coach Frankie McAvoy is also leaving the club.
An announcement regarding the now-vacant head coach's position will follow in "due course", according to the club statement.
Former Newcastle United goalkeeper Rob Elliot, who left Carlisle's fellow National League side Gateshead on Wednesday, has been linked with the post.