The 25-year-old batsman was transferred to St Vincent's intensive care unit after surgery and his condition is not expected to become clear for 24-48 hours.
"We're all in shock," Cricket Australia boss James Sutherland told reporters in Melbourne, his voice trembling.
"All we know is that it's serious and he's fortunate to be in the best possible place right now with experts all around him."
Fitted with a ventilator to aid his breathing, Hughes was rushed from the Sydney Cricket Ground in an induced coma, having collapsed to the ground when hit by the delivery from New South Wales fast bowler Sean Abbott.
Hughes, who had been touted to replace injured Australia captain Michael Clarke for next week's test match against India, had scored 63 runs for South Australia in the Sheffield Shield match before being hit.
Apparently dazed by the blow, the left-hander stooped and put his hands on his knees before falling face first onto the pitch, prompting players and medical staff to rush to his aid.
The match was later called off.
NO GENTEEL GAME
Though often viewed as a genteel game, cricket's fastest bowlers regularly deliver the ball at speeds of over 140kmh and batsmen defend themselves with a wooden bat less than a metre long and about four inches wide.
A cricket ball is roughly the same shape and size as a baseball but heavier and harder.
While batsmen are heavily padded, they often sustain painful and perfectly legal blows from fast bowlers, who have full license to launch deliveries that bounce up at head height.
Balls occasionally strike batsmen on the helmet, sometimes drawing blood on impact, but the seriousness of Hughes's injury shocked seasoned cricket writers and players alike.
"Thoughts are with Phil Hughes. Terrible to see and just shows how dangerous our game can be," Australia legspinner James Muirhead tweeted.
Hughes was placed on a motorised stretcher and taken to the edge of the field where medical staff performed mouth-to-mouth resuscitation before he was rushed to hospital by ambulance.
After scans at the hospital, he was taken straight into surgery.
Australia captain Clarke arrived to check on Hughes at the hospital, where the stricken batsman's mother and sister were also present.
News of the injury sparked a wave of sympathy from the global cricketing community and fans on social media.
"Our thoughts and prayers are with phil and his family! He is a great fighter and a great young man!" Australia coach Darren Lehmann tweeted.
A popular team player born in a small town in northern New South Wales state, the pint-sized Hughes played 26 tests and 25 one-day internationals for Australia, but never quite cemented his place in the national set-up.
Hughes has long struggled to shake off perceptions of vulnerability against short-pitched bowling, but with Clarke injured, he was backed to regain a spot in the test team for the first match in Brisbane against India starting December 4.
