Hughes, 54, quit for "unwittingly" misleading parliament over the affair after days of media and political attacks.
Immigration is set to be a key issue at the next election, expected next year, with Prime Minister Tony Blair keen to counter opposition claims that his government is too liberal in allowing asylum seekers and new immigrants into Britain.
Hughes was replaced by Des Browne, a junior minister in the Work and Pensions department, indicating that any wider reshuffle will not spill over to major government figures.
Hughes, who was elected to parliament in 1997 when Blair was swept to power, tendered her resignation on Wednesday night.
"Nothing is more important than my integrity and while I did not intentionally mislead anyone, I have decided that I cannot in conscience continue to serve as immigration minister," she told parliament in a resignation statement on Thursday.
Blair later told his monthly news conference she had behaved with "integrity" and a "great deal of courage".
Jumped or pushed?
It was unclear whether Hughes had jumped or was pushed although she received strong backing from her boss, Home Secretary David Blunkett, and Blair this week.
Analysts said Blair was unlikely to suffer much personal political damage but Conservative leader Michael Howard launched a scathing attack on Blair's Labour government.
"What we need in this country is a government that will get a grip on this problem...and make sure that we have proper immigration rules that are firm but fair," Howard said.
"That is what we haven't got at the moment."