The international batsman was struck on the head by a short-pitched delivery when batting in a domestic match on Tuesday, with the force of the blow piercing his vertebral artery, medical staff said at St Vincent's hospital.
"The head injury he suffered was catastrophic," Tony Grabs, Director of Trauma at St Vincent's, told reporters.
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"Over a period of the first 24-48 hours, as we know, he did not make very much improvement and unfortunately as a consequence of the injury he died."
Governing body Cricket Australia (CA) confirmed the 25-year-old had lost his fight for life with a tweet that cast a pall over a cricket-mad nation which is co-hosting the World Cup early next year.
"The word tragedy gets used too often in sport, but this freak accident is now real life tragedy," CA chief executive James Sutherland told reporters in a shaky voice.
"Phillip has been taken away from us too soon. Without doubt he was a rising star whose best cricket was in front of him. He'll be sadly missed and forever remembered."
The Australian flag was lowered to half-mast over the Sydney Cricket Ground where Hughes suffered the horrific injury on Tuesday when batting for state side South Australia.
Flags were also lowered at the iconic Melbourne Cricket Ground.
Australia Prime Minister Tony Abbott described Hughes as a "a young man living out his dreams". "His death is a very sad day for cricket and a heartbreaking day for his family," Abbott said in a statement.
HUGE LOSS
"The touring Indian team joins the cricketing fraternity across the world in offering condolences to the family of Phillip Hughes, who has departed from our midst,"
"Shocked to hear about Phil. Sad day for cricket. Deepest condolences to family, friends and well wishers. RIP PhilipHughes"
Sachin Tendulkar
"No no no no no. RIP Phillip Hughes."
Adam Gilchrist
"Heart broken! A very dark day. You will be missed, Phil Hughes. My prayers and thoughts go out to his family & friends."
AB de Villiers
"Just heard the worst news possible..our thoughts & prayers are with Phil, his family & friends. RIP Phil!!"
Mahela Jayawardene
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