The 21-year-old has been rewarded for his goalscoring form, hitting three goals this season after coming off the bench for 23 of his 25 first-team appearances.
McHugh has also scored 13 goals in 12 starts for the under-20s and has made 71 first-team appearances in all, all but eight as a substitute.
The Glasgow-born forward told MFCTV: "I've worked hard at it, even though I've not started as many games as I may have liked, and I hope the manager has recognised that, and it looks like I was rewarded.
"Obviously it's not easy to come on and score so hopefully if I get more starting time there will be more goals to come."
McHugh follows fellow youth-team graduates Stuart Carswell, Zaine Francis-Angol, Adam Cummins and Craig Moore in extending his contract.
Motherwell still have a number of first-team players out of contract in the summer. Darren Randolph, Simon Ramsden, Tom Hateley, Nicky Law, Chris Humphrey, James McFadden, Michael Higdon and Omar Daley are all in the final months of their deals.