The England Under-21 international is regarded as one of the most promising talents outside of the Premier League, with Liverpool among several clubs reported to be monitoring him.
Hughes came through the academy at Derby and was a regular during the club's impressive 2013-14 campaign, which ended with defeat to QPR in May's play-off final at Wembley.
The 19-year-old has now followed Jeff Hendrick, Craig Forsyth and Jake Buxton in putting pen to paper on a new contract with Steve McClaren's side that will run until 2018.
McClaren told the club's official website: "We're pleased that Will has decided to extend his contract with Derby County for the next four years.
"He is a promising young talent and we're looking forward to working with him over the next few years to help continue his development."
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