Hughes is the fourth of six children; her father is a Canadian of Irish descent  and her mother, Amy Pasternack, is a Jewish American. Her younger sister, Emily Hughes, was the women's 2006 bronze medalist in the U.S. National Figure Skating Championships, and she also placed seventh at the 2006 Olympics in Turin.
Hughes narrowly won the 2002 Olympic women's figure skating event, edging out Russia's Irina Slutskaya in a tie-breaker after Michelle Kwan faltered and fell to third place. In her long program, Hughes landed seven triple jumps, including two triple-triple combinations. She had been in fourth place going into the long program and few people predicted she would win. Although she appeared on the cover of Time magazine the week before the event, Hughes was considered the third-best American skater at the 2002 Olympics in Salt Lake City behind the top two finishers at the 2002 U.S. National Championships: the favorite, Michelle Kwan, and Sasha Cohen.
After her Olympic win, Hughes was honored with an enormous parade in her hometown of Great Neck. Hillary Rodham Clinton spoke at the event, and declared it was Sarah Hughes Day.
Hughes decided not to compete at the 2002 World Figure Skating Championships. The demands on her time of being an Olympic champion, combined with lucrative offers and endorsements, negatively impacted her skating. She finished in 6th place at the 2003 World Figure Skating Championships and henceforth withdrew from amateur skating. Although an Olympic champion, Hughes never won either a World or U.S. National title.
Hughes decided not to return to competitive figure skating to defend her Olympic gold medal title at the 2006 Winter Olympics in Turin, Italy. Instead, she skated professionally and began attending Yale University. The last women's Olympic champion to defend her title was Katarina Witt of East Germany, who won in 1984 and in 1988.
She is now a student at Yale University, but took the 2004-2005 year off to skate professionally with the Smuckers Stars on Ice tour company. In 2002, she received the James E. Sullivan Award as the top amateur athlete in the U.S.
Though she was not competing in the 2006 Torino Olympics herself, she was there cheering on her younger sister Emily Hughes, who took seventh place in ladies' figure skating there.